EXHIBIT 2.1
================================================================================
ASSET PURCHASE AGREEMENT
by and between
METROWERKS CORPORATION,
a Texas corporation and a wholly-owned subsidiary of Motorola, Inc.
on the one hand
and
APPLIED MICROSYSTEMS CORPORATION,
a Washington corporation
on the other hand.
Dated as of September 3, 2002
================================================================================
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
September 3, 2002, by and between Metrowerks Corporation, a Texas corporation
and a wholly-owned subsidiary of Motorola, Inc. ("Purchaser"), on the one hand,
and Applied Microsystems Corporation, a Washington corporation ("Seller"), on
the other hand.
RECITALS
A. Seller is engaged in the business of designing, developing,
manufacturing, marketing, distributing, licensing and selling (i)
hardware-enhanced software tools for the design and debugging of embedded
systems; (ii) software analysis tools for application software verification,
analysis and testing; and (iii) game development tools, including DVD-emulation
technology, allowing game developers to optimize games for video gaming consoles
(excluding the Excluded Assets (as defined below) the "Business"); and
B. The parties hereto desire that Seller sell, assign, transfer and
convey to Purchaser, and that Purchaser purchase from Seller, the Assets (as
defined below) in exchange for cash and the assumption of the Assumed
Liabilities (as defined below), all according to the terms and subject to the
conditions set forth in this Agreement (the "Transaction").
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth or referenced below:
1.1 "Acquisition" shall mean any transaction or series of transactions
involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which Seller is a constituent
corporation to such merger, consolidation, share exchange or business
combination, (ii) in which a Person or "group" (as defined in the Exchange Act
and the rules promulgated thereunder) of Persons directly or indirectly acquires
beneficial or record ownership or voting power of securities representing more
than forty percent (40%) of the outstanding voting securities of Seller, or
(iii) in which Seller issues securities representing more than forty percent
(40%) of the outstanding voting securities of Seller;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses (including, without limitation, the
Business) or assets (including, without limitation, the Assets) that constitute
or account for forty percent (40%) or more of the consolidated net revenues, net
income or assets of Seller; or
(c) any liquidation or dissolution of Seller.
1
1.2 "Acquisition Proposal" shall mean any offer, proposal, inquiry or
indication of interest from any Person other than Purchaser or its Affiliates
contemplating or otherwise relating to any Acquisition.
1.3 "Affiliate" shall mean a Person that directly or indirectly, through
one or more intermediaries, is controlled by, or is under common control with
another Person.
1.4 "Agreement" shall have the meaning set forth in the Preamble.
1.5 "Allocation Schedule" shall have the meaning set forth in Section
2.7.
1.6 "Ancillary Agreements" shall mean the Transition Services Agreement
and the Conveyance Documents.
1.7 "Assets" shall have the meaning set forth in Section 2.2.
1.8 "Assumed Contracts" shall mean only those Contracts listed on
Schedule 1.8, as such schedule may be updated by the Purchaser in its sole
discretion through the Closing Date to include Contracts entered into in the
ordinary course of business in accordance with the provisions hereof; provided,
however, that such schedule shall be updated (without the Purchaser's consent)
to include Contracts which are customer purchase orders to the extent that (a)
such customer purchase orders do not include extended support obligations and
non-ordinary course warranties exceeding $500,000 in the aggregate and (b) such
customer purchase orders are entered into in the ordinary course of business in
accordance with the provisions hereof.
1.9 "Assumed Liabilities" shall have the meaning set forth in Section
2.4.
1.10 "Business" shall have the meaning set forth in Recital A.
1.11 "Business Records" shall mean any and all books, records, files,
drawings, documentation, data or information that have been or now are used in
or with respect to, in connection with or otherwise relating to the Business,
the Assets or the Assumed Liabilities; provided, however, that the Business
Records shall not include the personnel or employee records of any employees
except Key Employees and Prospective New Purchaser Employees who accept
Purchaser's offer of employment pursuant to Section 8.3.
1.12 "Claim Notice" shall have the meaning set forth in Section 11.1(b).
1.13 "Closing" shall have the meaning set forth in Article III.
1.14 "Closing Date" shall have the meaning set forth in Article III.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.16 "Confidentiality Agreement" shall mean the mutual confidentiality
and nondisclosure agreement, dated June 17, 2002, as amended on July 19, 2002,
by and between Purchaser and Seller.
1.17 "Continuing Employee" shall have the meaning set forth in Section
8.3(b).
1.18 "Contracts" shall mean any and all contracts, instruments,
understandings and other arrangements (whether written or oral) which are
material to the Business, the Transferred Intellectual Property, the Assumed
Liabilities or the Assets (including, without limitation, all such contracts,
2
instruments, understandings and other arrangements (whether written or oral)
involving future or existing obligations (contingent or otherwise) of, or future
or existing payments to, the Seller in excess of $25,000).
1.19 "Conveyance Documents" shall have the meaning set forth in Section
9.3(e).
1.20 "Copyrights" shall have the meaning set forth in Section
4.8(a)(iii).
1.21 "Declining Employee" shall have the meaning set forth in Section
8.3(b).
1.22 "Encumbrances" shall mean any and all restrictions on or conditions
to transfer or assignment, claims, liabilities, liens, pledges, mortgages,
restrictions, and encumbrances of any kind, whether accrued, absolute,
contingent or otherwise affecting the Assets.
1.23 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.24 "Excluded Assets" shall mean the assets of Seller identified on
Schedule 1.24.
1.25 "Excluded Liabilities" shall have the meaning set forth in Section
2.5.
1.26 "Governmental Entity" shall mean any court, or any federal, state,
municipal, provincial or other governmental or quasi-governmental authority,
department, commission, board, service, agency, political subdivision or other
instrumentality.
1.27 "Holdback Amount" shall have the meaning set forth in Section
2.6(b).
1.28 "Indemnification Period" shall have the meaning set forth in
Section 11.1(a).
1.29 "Indemnified Person" shall have the meaning set forth in Section
11.4(a).
1.30 "Indemnifying Party" shall have the meaning set forth in Section
11.4(a).
1.31 "Initial Purchase Price" shall have the meaning set forth in
Section 2.6(a).
1.32 "Intangibles" shall mean goodwill, guarantees, rights, warranties,
defenses and claims, choses in action, causes of action, demands, rights of
recovery, suits, covenants not to compete and other rights in favor of Seller
relating to the Assets, the Assumed Liabilities, the Business (other than any of
the foregoing enumerated items relating to the Excluded Assets), provided,
however, that "Intangibles" shall not include the Intellectual Property which is
not Transferred Intellectual Property.
1.33 "Intellectual Property" shall have the meaning set forth in Section
4.8(a).
1.34 "Issued Patents" shall have the meaning set forth in Section
4.8(a)(i).
1.35 "Key Employees" shall mean those employees listed on Schedule 1.35.
1.36 "Knowledge" or "Known" shall mean the actual knowledge of any of
the officers or directors of a Person, and, in addition, in the case of Seller,
the actual knowledge of Dennis Isherwood and Todd Greenwalt.
1.37 "Laws or Decrees" shall mean all applicable federal, state,
provincial and local laws, ordinances, rules, statutes, regulations and all
orders, writs, injunctions, awards, judgments or decrees.
3
1.38 "Liability" shall mean any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement, whether known or unknown,
whether accrued or unaccrued, whether absolute or contingent, whether due or to
become due, or whether liquidated or unliquidated, regardless of whether such
liability, indebtedness, obligation, guarantee or endorsement would be required
to be disclosed on a balance sheet prepared in accordance with generally
accepted accounting principles.
1.39 "Libra Business" shall mean the business of developing, selling and
marketing technology designed to enhance the operation of server farms,
including (a) the Intellectual Property formerly held by Reba Technologies,
Inc., the predecessor corporation to Libra Networks and (b) the business as
proposed to be conducted by Libra Networks.
1.40 "Libra Networks" shall mean Libra Networks, Inc., a Washington
corporation and successor to Reba Technologies, Inc., and a wholly-owned
subsidiary of Seller, and Libra Networks, a division of Seller.
1.41 "Losses" shall mean any loss, demand, action, cause of action,
assessment, damage, Liability, claim, cost or expense, including without
limitation, interest, penalties and reasonable attorneys' and other professional
fees and expenses incurred in the investigation, prosecution, defense or
settlement thereof, but excluding special or consequential damages (including
without limitation loss of profits or revenues) related to any such loss,
demand, action, cause of action, assessment, damage, liability, cost or expense,
other than special or consequential damages actually awarded to a third party
and paid or payable to such third party by a party hereto.
1.42 "Material Adverse Change" shall mean any change that results in a
Material Adverse Effect.
1.43 "Material Adverse Effect" shall mean any material adverse effect on
the condition (financial or otherwise), operations, properties or prospects of
the Business, Assets, Transferred Intellectual Property or Assumed Liabilities,
whether or not occurring in the ordinary course of business, provided that with
respect to Seller, none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Material Adverse
Effect: (a) a change in the market price or trading volume of Seller's common
stock; (b) a decline in Seller's revenue, in the third fiscal quarter of the
fiscal year in which this Agreement is executed and delivered, by an amount less
than fifty percent (50%) of Seller's revenues for the immediately preceding
fiscal quarter; or (c) conditions affecting Seller's industry as a whole or the
U.S. economy as a whole.
1.44 "Miscellaneous Assets" shall mean the assets listed on Schedule
1.44 hereto.
1.45 "Patents" shall have the meaning set forth in Section 4.8(a)(ii).
1.46 "Patent Applications" shall have the meaning set forth in Section
4.8(a)(ii).
1.47 "Permits" shall mean any and all licenses, permits, authorizations,
certificates, franchises, variances, waivers, consents and other approvals from
any Governmental Entity relating solely to the Business, the Assets or the
Assumed Liabilities.
1.48 "Permitted Encumbrances" shall mean (a) easements, covenants,
rights-of-way or other similar restrictions and imperfections of title, (b)
liens for taxes not yet due and payable, and (c) liens identified on Schedule
1.48 hereto.
4
1.49 "Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Entity.
1.50 "Prospective New Purchaser Employees" shall mean those employees of
Seller listed on Schedule 1.50 hereto to whom Purchaser shall make offers of
employment as provided in Section 8.3(b).
1.51 "Proceeding" shall mean any claim, action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Entity or any arbitrator or arbitration panel.
1.52 "Proxy Statement" shall mean the proxy statement to be sent to
Seller's shareholders in connection with the Seller Shareholders' Meeting.
1.53 "Purchase Price" shall have the meaning set forth in Section 2.6.
1.54 "Purchaser" shall have the meaning set forth in the Preamble.
1.55 "Purchaser Compliance Certificate" shall have the meaning set forth
in Section 9.2(a).
1.56 "Purchaser Indemnifiable Losses" shall have the meaning set forth
in Section 11.2(a).
1.57 "Purchaser Indemnitees" shall mean (a) Purchaser, (b) Purchaser's
Affiliates, or (c) the officers, directors, employees, agents, attorneys,
accountants and advisors of Purchaser or any such Affiliate.
1.58 "Quality Standards" shall have the meaning set forth in Section
6.9.
1.59 "Related Party" shall mean the following persons: (a) each
individual who is an officer or director of Seller; (b) any nominee for election
as a director of Seller; (c) any security holder of Seller who is known to
Seller to own of record or beneficially more than five percent (5%) of any class
of Seller's voting securities; and (d) any member of the immediate family of any
of the individuals referred to in clauses (a) through (c) above.
1.60 "Required Seller Shareholder Vote" shall have the meaning set forth
in Section 4.2.
1.61 "Restricted Period" shall have the meaning set forth in Section
8.5.
1.62 "SEC" shall mean the United States Securities and Exchange
Commission.
1.63 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.64 "Seller" shall have the meaning set forth in the Preamble.
1.65 "Seller Board Recommendation" shall have the meaning set forth in
Section 6.7(b).
1.66 "Seller Compliance Certificate" shall have the meaning set forth in
Section 9.3(a).
1.67 "Seller Financial Statements" shall have the meaning set forth in
Section 4.6.
1.68 "Seller Indemnifiable Losses" shall have the meaning set forth in
Section 11.3(a).
5
1.69 "Seller Indemnitees" shall mean (a) Seller, (b) Seller's
Affiliates, or (c) the officers, directors, employees, agents, attorneys,
accountants and advisors of Seller or any such Affiliate.
1.70 "Seller SEC Documents" shall have the meaning set forth in Section
4.6.
1.71 "Seller Representative" shall have the meaning set forth in Section
6.5(a).
1.72 "Seller Shareholders' Meeting" shall have the meaning set forth in
Section 6.7(a).
1.73 "Seller Triggering Event." A "Seller Triggering Event" shall be
deemed to have occurred if: (a) the board of directors of Seller shall have
failed to recommend that Seller's shareholders vote to approve this Agreement,
or shall have withdrawn or modified in a manner adverse to Purchaser the Seller
Board Recommendation; (b) Seller shall have failed to include in the Proxy
Statement the Seller Board Recommendation or a statement to the effect that the
board of directors of Seller has determined and believes that the Acquisition is
in the best interests of Seller's shareholders; (c) the board of directors of
Seller shall have approved or recommended any Acquisition Proposal; (d) Seller
shall have entered into any letter of intent, preliminary agreement or similar
document relating to any Acquisition Proposal; or (e) Seller or any Seller
Representative shall have violated any of the restrictions set forth in Section
6.5.
1.74 "Substitute Prospective New Purchaser Employee" shall have the
meaning set forth in Section 8.3(b).
1.75 "Superior Proposal" shall mean a written bona fide Acquisition
Proposal which the board of directors of Seller determines, in good faith (after
consultation with, and receipt of advice from, an outside financial advisor of
nationally-recognized reputation and counsel and after considering all terms and
conditions of such Acquisition Proposal, including the likelihood and timing of
its consummation), would result in a transaction more favorable from a financial
point of view than the Transaction.
1.76 "Tangible Assets" shall mean the tangible assets, equipment and
other fixed assets, including all computer hardware, service tools, aids,
manuals, schematics, diagnostics, machinery and office furnishings listed on
Schedule 1.76.
1.77 "Tax" shall mean any federal, state, local or foreign net income,
alternative or add-on minimum, gross income, gross receipts, property, sales,
use, transfer, gains, license, excise, employment, payroll, withholding or
minimum tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental
Entity.
1.78 "Tax Return" means any return, report or similar statement required
to be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
1.79 "Third Party Claim" shall have the meaning set forth in Section
11.4.
1.80 "Third Party Proprietary Assets" shall have the meaning set forth
in Section 4.8(c).
1.81 "Trademarks" shall have the meaning set forth in Section
4.8(a)(iv).
1.82 "Trade Secrets" shall have the meaning set forth in Section
4.8(a)(v).
1.83 "Transaction" shall have the meaning set forth in Recital B.
6
1.84 "Transferred Intellectual Property" shall mean all Intellectual
Property used, related to or otherwise necessary to conduct the Business as
presently conducted and all physical or electronic embodiments of such
Intellectual Property in Seller's possession, custody or control, but shall not
include Intellectual Property that is an Excluded Asset.
1.85 "Transferred Inventory" shall mean the inventory set forth on
Schedule 1.85, but excluding any such inventory relating to any of the following
Assumed Contracts for which consent to assignment is required but not obtained
at or prior to Closing: (a) that certain Development Manufacturing, Supply and
Distribution Agreement between the Seller and Nintendo Co Ltd., dated March
2000, and (b) that certain Xbox Component Purchase Agreement between the Seller
and Microsoft Corporation, dated December 19, 2000.
1.86 "Transition Services Agreement" shall have the meaning set forth in
Section 8.7.
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets; Assumption of Assumed Liabilities.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, effective as of the Closing Date:
(i) Seller agrees to sell, assign, transfer, convey
and deliver to Purchaser at the Closing, and Purchaser agrees to purchase from
Seller, all of Seller's right, title and interest in and to the Assets, free and
clear of all Encumbrances except Permitted Encumbrances;
(ii) Seller agrees to assign to Purchaser, and
Purchaser agrees to assume from Seller, the Assumed Liabilities;
(iii) Except as set forth in Section 2.8, Seller
agrees to assign to Purchaser, and Purchaser shall assume from Seller, all of
Seller's rights and obligations under the Assumed Contracts, subject to the
obtaining of all necessary consents by the other parties thereto in accordance
with the provisions hereof.
(b) In connection with the Transaction, on the Closing Date,
Seller shall take any and all actions that may be required, or reasonably
requested by Purchaser, to transfer good and marketable title to all of the
Assets to Purchaser. Seller shall deliver possession of all of the Assets to
Purchaser on the Closing Date at the location and by such means as are
reasonably designated by Purchaser, and Seller shall further deliver to
Purchaser proper assignments, bills of sale, conveyances and other instruments
of sale and/or transfer in forms reasonably satisfactory to Purchaser in order
to convey to Purchaser good and marketable title to the Assets. Additionally, at
the request of Purchaser, Seller shall use its commercially reasonable efforts
to convey any foreign Assets to be conveyed to Purchaser pursuant to the
Transaction to a designated Affiliate of Purchaser pursuant to such Conveyance
Documents as necessary to effectuate such conveyances.
2.2 Assets. As used in this Agreement, the term "Assets" means,
collectively, all right, title and interest, in and to the following:
(a) All Transferred Intellectual Property;
7
(b) All rights and benefits of Seller in existence on the Closing
Date or arising from and after the Closing Date under the Assumed Contracts;
(c) All Transferred Inventory;
(d) All Tangible Assets;
(e) All Business Records; provided, however, that Seller shall be
permitted to retain one (1) copy thereof;
(f) All Intangibles;
(g) All Permits to the extent transferable by Seller; and
(h) All Miscellaneous Assets.
2.3 Excluded Assets. Seller shall retain all of its right, title and
interest in and to, and Purchaser shall not acquire any interest in, the
Excluded Assets.
2.4 Assumption of Liabilities. Subject to and upon the terms and
conditions of this Agreement, effective as of the Closing Date, Purchaser agrees
to assume from Seller and to thereafter pay, perform and otherwise discharge
according to their terms all of the following Liabilities of Seller (the
"Assumed Liabilities"):
(a) All Liabilities arising under the Assumed Contracts (other
than any Assumed Contract for which a consent for the effective assignment and
assumption by Purchaser of such Assumed Contract is required but not obtained),
but in any case only to the extent that:
(i) such Liabilities (A) arise after the Closing Date, (B)
constitute warranty, repair, support and code test installation obligations, and
(C) arise under the express terms of such Assumed Contracts, or
(ii) such other Liabilities (A) arise after the Closing
Date, (B) do not arise from or relate to any breach by Seller of any provision
of any such Assumed Contracts, (C) do not arise from or relate to any event,
circumstance or condition occurring or existing on or prior to the Closing Date
that, with notice or lapse of time, would constitute or result in a breach of
any of such Assumed Contracts, and (D) are ascertainable (in nature and amount)
solely by reference to the express terms of such Assumed Contracts.
(b) The Liabilities identified on Schedule 2.4.
2.5 Liabilities Not Assumed. Purchaser shall not assume or become liable
or obligated in any way, and Seller shall retain and remain solely liable for
and obligated to discharge and indemnify and hold Purchaser harmless for all
Liabilities other than the Assumed Liabilities (collectively, the "Excluded
Liabilities").
2.6 Purchase Price. In consideration for the purchase of the Assets and
Seller's covenant not to compete contained in Section 8.5, Purchaser shall
assume the Assumed Liabilities pursuant to Section 2.4 and shall pay to Seller
the sum of Three Million Seven Hundred Eighty Four Thousand and Four
($3,784,004) U.S. Dollars ($3,300,000 plus $584,004 (i.e., value of certain
purchased Transferred Inventory ), less $200,000 (i.e., the cost of existing
support obligations under Contracts where Seller has
8
recorded or deferred revenue on or prior to the Closing Date) plus $100,000
(i.e. value of certain Tangible Assets)) less any amounts deducted under Section
6.9 less any Deducted Amounts plus any Additional Amounts (the "Purchase
Price"), payable as follows:
(a) The Purchase Price less $500,000, payable in cash at the
Closing by wire transfer of immediately available funds to an account designated
in writing by Seller prior to the Closing (such amount, the "Initial Purchase
Price"); and
(b) Five Hundred Thousand U.S. Dollars ($500,000), subject to
downward adjustment in accordance with Article XI hereof, payable in cash upon
the expiration of the Indemnification Period by wire transfer of immediately
available funds to an account designated in writing by Seller prior to such
payment date (such amount, the "Holdback Amount").
(c) For purposes of this Section 2.6, "Additional Amounts" and
"Deducted Amounts" shall have the meanings set forth on Schedule 2.6.
2.7 Allocation. Seller and Purchaser shall cooperate in good faith in
the preparation of a joint schedule (the "Allocation Schedule") allocating the
Purchase Price (including the Assumed Liabilities) among the assets and Seller's
covenant not to compete contained in Section 8.5. If Seller and Purchaser are
able to agree upon the Allocation Schedule within 60 days following the Closing
Date, Seller and Purchaser shall each file IRS Form 8594, and all federal,
state, local and foreign tax returns, in accordance with the Allocation
Schedule. If Seller and Purchaser are unable to complete the Allocation Schedule
within 60 days following the Closing Date, each of Seller and Purchaser may file
IRS Form 8594 and any federal, state, local and foreign tax returns, allocating
the aggregate consideration (including the Assumed Liabilities) among the Assets
in the manner each believes appropriate, provided such allocation is reasonable
and in accordance with Section 1060 of the Code. Neither party shall file any
Tax Return or other document with, or make any statement or declaration to, any
Governmental Entity that is inconsistent with such allocation.
2.8 Assignment of Seller's Contracts. Nothing in this Agreement shall be
deemed to constitute an assignment or an attempt to assign any asset, contract,
claim, right or other agreement to which Seller is a party if the attempted
assignment thereof without the consent of the other party to such asset,
contract, claim, right or other agreement would constitute a breach or other
contravention thereof or affect in any way adversely the rights of Seller
thereunder.
ARTICLE III
THE CLOSING
The consummation of the Transaction will take place at a closing to be
held at the offices of Gray Cary Ware & Freidenrich LLP, 701 Fifth Avenue, Suite
7000, Seattle, Washington (the "Closing") on the date three (3) business days
after all conditions (other than the respective delivery obligations of the
parties) hereto have been satisfied or waived, or at such other time or date as
may be agreed to by the parties to this Agreement (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in the Seller Disclosure Schedule,
attached hereto as Schedule IV, the following representations and warranties are
made by Seller as set forth below:
9
4.1 Organization. Seller is a corporation duly organized and validly
existing under the laws of the State of Washington. Seller is duly qualified or
licensed to do business as a foreign corporation in each state of the United
States in which it is required to be so qualified or licensed, except in states
which the failure to qualify, in the aggregate, would not have a Material
Adverse Effect.
4.2 Authorization. This Agreement and the Ancillary Agreements have
been, or upon their execution and delivery hereunder will have been, duly and
validly executed and delivered by Seller and constitute, or upon their execution
and delivery hereunder will constitute, valid and binding agreements of Seller
enforceable against Seller in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by general
equitable principles or the exercise of judicial discretion in accordance with
such principles. Seller has all requisite power and authority to execute, and
deliver this Agreement and, at the time of the Closing, will have all requisite
power and authority to execute and deliver the Ancillary Agreements and to carry
out the transactions contemplated herein and therein. All requisite corporate
action on the part of Seller has been taken to authorize the execution and
delivery of the Agreement and the Ancillary Agreements, subject only to the
approval of the Transaction and this Agreement by Seller's shareholders as
contemplated by Section 6.7. The affirmative vote of the holders of a majority
of the shares of common stock of Seller outstanding on the record date for the
Seller Shareholders' Meeting called pursuant to Section 6.7 (the "Required
Seller Shareholder Vote") is the only vote of the holders of any of Seller's
capital stock necessary under applicable Laws or Decrees to approve this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby.
4.3 No Conflicts; Consents. The execution and the delivery of this
Agreement and the Ancillary Agreements do not, and the consummation or
performance by Seller of the transactions contemplated herein and therein and
compliance with the provisions hereof and thereof will not, conflict with,
contravene, result in a breach of, constitute a default (with or without notice
or lapse of time, or both) under or violation of, or give any party a right to
terminate, accelerate, declare a default under or cancel any provision of, (a)
the Articles of Incorporation or Bylaws of Seller or any resolutions adopted by
the shareholders, board of directors or any committee of the board of directors
of Seller, (b) any Contract listed on Schedule 4.9(a) , except for a
non-material breach of, default under, or violation of any such Contract, or (c)
any Law or Decree applicable to Seller. Except for consents, authorizations,
filings, approvals and registrations required under any applicable Law or Decree
which, if not obtained or made, would not have a Material Adverse Effect and
would not prevent or materially alter or delay the Transaction, no consent of
any third party or any Governmental Entity is required to be obtained on the
part of Seller to permit the consummation of the transactions contemplated in
this Agreement and the Ancillary Agreements.
4.4 Title to Assets; Sufficiency and Condition of Assets. Seller has
good and marketable title to all of the Assets, free and clear of all
Encumbrances except for Permitted Encumbrances. At the Closing, Seller will
sell, convey, assign, transfer and deliver to Purchaser good and marketable
title, and all Seller's right and interest in and to all of the Assets, free and
clear of all Encumbrances except for Permitted Encumbrances. The Assets will
collectively constitute, as of the Closing Date, all of the properties, rights,
interests and other tangible and intangible assets necessary to enable the
Purchaser to conduct the Business in the manner in which the Business has been
conducted by Seller and is currently proposed by Purchaser to be conducted. The
Transferred Inventory purchased by Purchaser is (a) free of any material defect
or deficiency and (b) in good, usable and currently marketable condition. All
inventory sold by Seller related to warranty, repair, support and code test
installation obligations to be assumed pursuant to Section 2.4 was, at the time
such inventory was sold by Seller, (a) free of any material defect or deficiency
and (b) in good, usable and currently marketable condition. All of the tangible
assets, equipment and fixed assets listed on Schedule 1.76 are structurally
sound, free of defects
10
and deficiencies and in good condition and repair (ordinary wear and tear
excepted), and are adequate for the uses to which they are being put to use.
4.5 Compliance with Laws. Seller is in compliance with all applicable
Laws or Decrees with respect to or affecting the Business, the Assets, or the
Assumed Liabilities, except for such failure to comply as which would not result
in a Material Adverse Effect. Seller is not subject to any order, writ, award,
judgment, injunction or decree issued by any Governmental Entity which could
impair the ability of Seller to consummate the transactions contemplated herein
or which could adversely affect Purchaser's conduct of the Business or its use
and enjoyment of the Assets or the Transferred Intellectual Property from and
after the Closing Date.
4.6 SEC Reports; Seller Financial Statements. Seller has made available
to Purchaser or its counsel through EDGAR a true and complete copy of each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act), definitive proxy statement, and
other filing filed with the SEC by Seller since January 1, 2000, and, prior to
the Closing, Seller will have made available to Purchaser or its counsel through
EDGAR true and complete copies of any additional documents filed with the SEC by
Seller prior to the Closing Date (collectively, the "Seller SEC Documents"). As
of their respective filing dates, none of the Seller SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed Seller SEC Document prior to the date
hereof. The financial statements of Seller, including the notes thereto,
included in the Seller SEC Documents (the "Seller Financial Statements"),
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
of the SEC). The Seller Financial Statements fairly present the consolidated
financial condition and operating results of Seller and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no change in Seller's accounting policies except as described in the notes to
the Seller Financial Statements.
4.7 Absence of Certain Changes or Events. Since June 30, 2002, Seller
has conducted the Business in the ordinary course consistent with past practices
and, without limiting the generality of the foregoing, has not:
(a) suffered any Material Adverse Change and no condition exists
that could be expected to result in a Material Adverse Change;
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, having a Material Adverse Change;
(c) effected any acquisition, sale, transfer, lease or license of
the Assets other than in the ordinary course of business and consistent with
past practices;
(d) granted any license with respect to the Transferred
Intellectual Property other than in the ordinary course of business and
consistent with past practices;
(e) incurred any Liabilities relating to the Business except in
the ordinary course of business and consistent with past practices;
11
(f) permitted or allowed any of the Assets to be subjected to any
Encumbrance of any kind (other than a Permitted Encumbrance) other than in the
ordinary course of business, consistent with past practices;
(g) waived any rights under, amended, terminated, or defaulted
under any Contract listed on Schedule 4.9(a);
(h) with respect to the Business or the Assumed Contracts,
incurred any contingent Liability as guarantor or otherwise with respect to the
obligations of others, other than in the ordinary course consistent with past
practices;
(i) entered into any transaction or taken any other action with
respect to the Business or the Assets outside the ordinary course of business,
consistent with past practices; or
(j) agreed, committed or offered (in writing or otherwise) to
take any action described in this Section 4.7 or outside of its ordinary course
of business or which would constitute a breach of any of the representations or
warranties of Seller contained in this Agreement if such action was taken on or
following the date hereof.
4.8 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, continuations, continuations-in-part,
reexamination proceedings, invention disclosures and records of invention
(collectively "Patent Applications" and, with the Issued Patents, the
"Patents");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names and all goodwill
associated therewith (collectively, "Trademarks");
(v) all technology, ideas, inventions, improvements,
designs, proprietary information, manufacturing and operating specifications,
know-how, formulae, trade secrets, technical data, computer programs, hardware,
software (including all source code and object code) and processes
(collectively, "Trade Secrets"); and
(vi) (A) all industrial designs and any registrations and
applications therefor throughout the world, (B) all databases and data
collections and all rights therein throughout the world, (C) all financial,
marketing and business data, pricing and cost information, business plans,
marketing
12
plans and customer and supplier lists and information, (D) all documentation
related to any of the foregoing throughout the world, and (E) all marketing
information and content relating to the Business (excluding general content
regarding the Business) on Seller's or its Affiliates' web sites.
(b) Except with respect to Third Party Proprietary Assets
(defined below), Seller owns all right, title and interest in and has legally
enforceable rights to use and exploit without limitation all Transferred
Intellectual Property, free and clear of all claims and Encumbrances (including
without limitation exclusive distribution rights granted to third parties). No
Person other than Seller has any right, claim or interest in or with respect to
any such Transferred Intellectual Property. There is no unauthorized use,
disclosure or misappropriation of the Transferred Intellectual Property by any
employee or, to Seller's Knowledge, former employee of Seller or to Seller's
Knowledge, by any other third party.
(c) Schedule 4.8(c) sets forth all Patents, Trademarks,
registered Copyrights currently used in the Business. The Intellectual Property
licensed to Seller under the Contracts set forth on Schedule 4.8(c) constitute
all of the Transferred Intellectual Property that is used or otherwise exploited
in connection with the Business and owned by a third party, excluding "off the
shelf" or other like software that is widely available through regular
commercial distribution channels on standard terms and conditions)
(collectively, the "Third Party Proprietary Assets"). The Contracts set forth on
Schedule 4.8(c) constitute all Contracts pursuant to which Seller is authorized
to use or otherwise exploit such Third Party Proprietary Assets. Seller has
legally enforceable rights to use all Third-Party Proprietary Assets in the
manner in which such Third Party Proprietary Assets have been (and are being)
used in connection with the Business free and clear of all claims and
Encumbrances (including without limitation exclusive distribution rights granted
to third parties).
(d) Seller is not in breach of any license, sublicense or other
agreement relating to the Transferred Intellectual Property. Except as set forth
in Schedule 4.8(d), neither the execution, delivery or performance of this
Agreement or any Ancillary Agreement contemplated hereby nor the consummation of
the Transaction will contravene, conflict with or result in an infringement on
Purchaser's right to own or use any Transferred Intellectual Property, including
any licenses, sublicenses and other agreements to which Seller is a party and
pursuant to which Seller is authorized to use in the Business any Intellectual
Property owned by any third party.
(e) To Seller's Knowledge, Seller is not infringing,
misappropriating or making unlawful use of any Patents used in the Business
owned or used by a third party. Seller is not infringing, misappropriating or
making unlawful use of any proprietary asset other than Patents used in the
Business owned or used by any third party. Seller has not brought a Proceeding
alleging infringement of the Transferred Intellectual Property or breach of any
license or agreement involving the Transferred Intellectual Property against any
third party.
(f) Seller has taken commercially reasonably and customary
measures and precautions as necessary to protect and maintain the value of all
material Transferred Intellectual Property. Except with respect to such
Transferred Intellectual Property whose value would be unimpaired by public
disclosure, (i) Seller has taken commercially reasonable and customary measures
to protect and maintain the confidentiality of all Transferred Intellectual
Property (including, implementing and complying with commercially reasonable and
customary internal trade secret and confidentiality policies and procedures and
appropriately marking or identifying Transferred Intellectual Property as
confidential or proprietary), and (ii) except as set forth on set forth on
Schedule 4.8(f), there has been no disclosure by Seller or, to Seller's
Knowledge, by any of its customers, distributors or resellers, of Transferred
Intellectual Property except pursuant to binding agreements containing
confidentiality provisions protecting such Transferred Intellectual Property
from unauthorized use or further disclosure.
13
(g) With respect to the Transferred Intellectual Property, (i) no
Proceeding is pending or, to the Knowledge of Seller, threatened, nor has any
claim been made, nor has Seller received any written allegation, notice or
statement, which challenges the legality, validity, enforceability or use by
Seller of such Transferred Intellectual Property, and (ii) all maintenance,
annuity and other fees have been fully paid and all filings have been properly
made, in each case in a timely manner.
(h) All Intellectual Property that is used in or material to (or
that relates exclusively to) the Business and that is registered with any
Governmental Entity and owned or controlled by Seller is valid and subsisting.
The Transferred Intellectual Property does not infringe or conflict with, nor,
to Seller's Knowledge, has it ever infringed or conflicted with, any
Intellectual Property right of any Person. To the Knowledge of Seller, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Intellectual Property right of any Person infringes or conflicts with, any
Transferred Intellectual Property. The Seller has not received any notice or
other communication (in writing or otherwise) that Seller (in connection with
the Business) or any of the Transferred Intellectual Property has infringed
upon, misappropriated or made unlawful use of any proprietary asset owned or
used by any other Person.
(i) Except as set forth in Schedule 4.8(i) of the Seller
Disclosure Schedule, Seller has not disclosed or delivered to any Person, or
permitted the disclosure or delivery to any escrow agent or other Person, of the
source code for any product related to the Business or any other Transferred
Intellectual Property. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, result in the disclosure or delivery to any Person of the source
code for any product related to the Business or any other Transferred
Intellectual Property or the release from any escrow of any source code for any
product related to the business or any other Transferred Intellectual Property.
Schedule 4.8(i) of the Seller Disclosure Schedule also specifically identifies,
as applicable, all Contracts pursuant to which (i) Seller has licensed,
authorized or otherwise permitted any third party to use, distribute or
otherwise exploit the Transferred Intellectual Property (so called "out-bound"
licenses), (ii) any rights with respect to the Transferred Intellectual Property
granted on an exclusive basis to or by Seller, (iii) any of the Transferred
Intellectual Property has been licensed by Seller other than in connection with
the commercial sale or license of Seller's products or services (including,
without limitation, any license in connection with the avoidance or settlement
of any Proceeding), or (iv) Seller has agreed not to compete or has otherwise
agreed not to engage in any business or market or not to solicit business from
any entity or class of entities.
(j) No product related to the Business contains any "back door,"
"time bomb," "Trojan horse," "worm," "drop dead device," "virus" or other
software routines or hardware components designed to permit unauthorized access
or to disable or erase software, hardware or data without the consent of the
user.
(k) Seller has not incorporated into the products related to the
Business any software code licensed to Seller under the Gnu General Public
License (GPL), the Gnu Lesser General Public License (LGPL), or any other
generally available software license that requires the licensee to make the
licensed software code available to others in source code form.
(l) Except as set forth in Schedule 4.8(l), the execution,
delivery and performance by Seller of this Agreement, and the consummation of
the Transaction will not give rise to any right of any third party to terminate,
impair or alter (including without limitation, in each case, by way of licenses
triggered by the consummation of the Transaction) any of Seller's rights in and
to any Transferred Intellectual Property.
4.9 Contracts and Arrangements.
14
(a) Schedule 4.9(a) hereto contains a true and accurate list of
all Contracts. Except for the Contracts, Seller is not a party to or otherwise
bound by the terms of any contract, agreement or obligation, written or oral,
materially affecting the Assets, the Transferred Intellectual Property, or the
Assumed Liabilities. With respect to the Contracts listed on Schedule 4.9(a),
(i) Seller has not and, to Seller's Knowledge, no other Person has, violated or
breached, or declared or committed any default under any such Contract; (ii) no
event has occurred, and no circumstance or condition exists that is reasonably
likely to result in a violation, breach or default by Seller or, to Seller's
Knowledge, by any other Person of or under any such Contract; (iii) Seller has
not received any notice or other communication (in writing or otherwise)
regarding any actual alleged violation or breach of, or default under, any such
Contract; (iv) Seller has not waived any material right under any such Contract;
and (v) each of the Contracts is (assuming due authorization and execution by
the other party or parties thereto) valid, binding and in full force and effect
and enforceable by Seller in accordance with its terms, except as enforcement
may be limited by general equitable principles and the exercise of judicial
discretion in accordance with such principles.
(b) Except as set forth on Schedule 4.9(b) attached hereto, no
consents are necessary for the effective assignment to and assumption by
Purchaser of any of the Assumed Contracts. The Seller does not have any
Knowledge of any basis upon which any party to any Assumed Contract may object
to (i) the assignment to Purchaser of any right under such Assumed Contract; or
(ii) the delegation to or performance by Purchaser of any obligation under such
Assumed Contract.
(c) Except as set forth in Schedule 4.9(c), no Person is
renegotiating, or has the right to renegotiate, any amount paid or payable to
Seller under any Assumed Contract or any other term or provision of any such
Assumed Contract.
4.10 Brokers. There is no broker, finder, investment banker or other
person, other than Needham & Co., Inc., whose fees are to be paid by Seller, who
would have any valid claim against any of the parties to this Agreement for a
commission or brokerage fee or payment in connection with this Agreement or the
transactions contemplated herein as a result of any agreement of, or action
taken by, Seller.
4.11 Litigation. There are no Proceedings or, to Seller's Knowledge,
investigations, pending before any Governmental Entity or, to Seller's
Knowledge, threatened or reasonably expected, against Seller (a) relating to the
Business, the Assets, the Assumed Liabilities or the Transferred Intellectual
Property, (b) which questions or challenges the validity of this Agreement or
any of the Ancillary Agreements to which either Seller is or will be a party, or
any of the transactions contemplated herein or therein or (c) which might be
reasonably expected to have a Material Adverse Effect on Seller. Seller is not a
party to or subject to any decree, order or arbitration award (or agreement
entered into in any administrative, judicial or arbitration proceeding with any
Governmental Entity) with respect to or affecting the Business, or any of the
Assets or the Assumed Liabilities.
4.12 Insurance. Seller maintains insurance policies relating to the
Business providing coverage sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed. All of such policies are in full force and effect, and Seller is
not in default with respect to any material provision of any of such policies.
Seller has not received notice from any issuer of any such policies of its
intention to cancel, terminate or refuse to renew any policy issued by it.
4.13 Taxes.
15
(a) Seller has, in respect of the Business and the Assets, (i)
filed all Tax Returns which are required to be filed and has paid all Taxes
which have become due pursuant to such Tax Returns or pursuant to any assessment
which has become payable, (ii) all such Tax Returns are complete and accurate in
all material respects and disclose all Taxes required to be paid in respect of
the Business and the Assets, (iii) all monies required to be withheld by Seller
from employees for income taxes and social security and other payroll taxes have
been collected or withheld, and either paid to the respective taxing
authorities, set aside in accounts for such purpose, or accrued, reserved
against and entered upon the books of the Business, (iv) no transaction
contemplated by this Agreement is subject to withholding under Section 1445 of
the Code, and (v) on or after the Closing Date, pursuant to any agreement or
arrangement entered into by Seller on or prior to the Closing Date, Purchaser
will not be obligated to make a payment to an individual that would be a
"parachute payment" to a "disqualified individual" as those terms are defined in
Section 280G of the Code, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(b) None of the Assets (i) is subject to any lien arising in
connection with any failure or alleged failure to pay any Taxes, (ii) secures
any debt the interest on which is tax-exempt under Section 103(a) of the Code,
(iii) is "tax-exempt use property" within the meaning of Section 168(h) of the
Code, (iv) is "tax-exempt bond financing property" within the meaning of Section
168(g)(5) of the Code, (v) is "limited use property" within the meaning of
Revenue Procedure 76-30 or (vi) will be treated as owned by any other person
pursuant to the provisions of Section 168(f)(8) of the Code. The transactions
contemplated by this Agreement are not subject to tax withholding pursuant to
the provisions of Code Section 3406 or Subchapter A of Chapter 3 of the Code or
any other provision of applicable Law. Seller is not a person other than a
United States person within the meaning of the Code.
4.14 Employee Matters.
(a) Schedule 4.14(a) of the Seller Disclosure Schedule accurately
sets forth, with respect to each Key Employee and each Prospective New Purchaser
Employee, (i) the name of such employee, (ii) the number of hours of sick-time
which such employee has accrued as of the date of this Agreement and the
aggregate dollar amount thereof, (iii) the number of hours of vacation time
which such employee has accrued as of the date of this Agreement and the
aggregate dollar amount thereof, and (iv) a general description of any health,
dental, vision, disability, life insurance and similar employee benefits
available to such employee.
(b) Except as set forth on Schedule 4.14(b), and except as
required under applicable Laws, no Key Employee or Prospective New Purchaser
Employee is entitled to severance pay or other benefits following termination of
such individual's employment with Seller.
(c) To the Knowledge of Seller, no Key Employee or Prospective
New Purchaser Employee (i) has received an offer to join a business that may be
competitive with the Business, (ii) is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other contract with any
Person (other than Seller) that may have an adverse effect on the performance by
such employee of any of his duties or responsibilities as an employee of the
Business, or (iii) has indicated that he or she does not intend to accept
employment with Purchaser.
(d) Schedule 4.14(d) of the Seller Disclosure Schedule sets forth
the name of, and a general description of the services performed by, each
independent contractor who has performed any services material to the Business
since January 1, 2001.
4.15 Compliance with the Foreign Corrupt Practices Act.
16
(a) Seller has not, to obtain or retain business, directly or
indirectly offered, paid or promised to pay, or authorized the payment of, any
money or other thing of value to (i) any Person who is an official, officer,
agent, employee or representative of any Governmental Entity or of any existing
or prospective customer (whether government owned or nongovernment owned), (ii)
any political party or official thereof, (iii) any candidate for political or
political party office, or (iv) any other Person while knowing or having reason
to believe that all or any portion of such money or thing of value would be
offered, given or promised, directly or indirectly, to any such official,
officer, agent, employee, representative, political party, political party
official, candidate or Person affiliated with such customer, political party or
official or political office.
(b) The Seller has at all times been in compliance with all Laws
and Decrees relating to export control and trade embargoes. No product related
to the Business sold or service provided by Seller during the last three years
has been, directly or, to the Seller's Knowledge, indirectly, sold to or
performed on behalf of Afghanistan, Cuba, Iraq, Iran, Libya or North Korea.
(c) The Seller has not violated the antiboycott prohibitions
contained in 50 U.S.C. Section 2401 et seq. or taken any action that can be
penalized under Section 999 of the Code. During the last three years, Seller has
not been a party to, been a beneficiary under or sold any product or performed
any service under any Contract under which a product has been sold, directly or,
to the Seller's Knowledge, indirectly, to customers in Bahrain, Iraq, Jordan,
Kuwait, Lebanon, Libya, Oman, Quatar, Saudi Arabia, Sudan, Syria, United Arab
Emirates or the Republic of Yemen.
4.16 Ability to Pay Debts. Immediately after giving effect to the
consummation of the Transaction (a) Seller will be able to pay its debts as they
become due in the usual course of its business, (b) Seller will have assets
(calculated at fair value) that exceed its debts, and (c) taking into account
all pending and, to Seller's Knowledge, threatened litigation, no final judgment
against Seller in actions for money damages is reasonably anticipated to be
rendered at a time when, or in an amount such that, Seller will be unable to
satisfy any such judgment promptly in accordance with its terms as well as all
other obligations of Seller.
4.17 Related Party Transactions. No Related Party has any direct or
indirect interest of any nature in any of the Assets or any assets relating to
the Business. Since January 1, 2001, no Related Party has entered into, or has
had any direct or indirect financial interest in, any Contract, transactions or
business dealing of any nature involving the Business. No Related Party is
competing, or has at any time since January 1, 2001 competed, directly or
indirectly, with the Business. To Seller's Knowledge, no event has occurred, and
no condition or circumstance exists, that might (with or without notice or lapse
of time) directly or indirectly give rise to or serve as a basis for any claim
or right in favor of any Related Party against or with respect to the Business.
4.18 Accuracy of Material Facts; Copies of Materials. No representation,
warranty or covenant of Seller contained in this Agreement or in any
certificate, schedule or exhibit delivered pursuant to this Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein and therein, taken as
a whole, not misleading in light of the circumstances under which such
statements were made. Seller has made available to Purchaser complete and
accurate copies of each Contract. Seller has delivered or, by Closing, will
deliver, accurate and complete copies of all Patents, Patent Applications
(including for those inventions for which Seller is in the course of preparing
or having applications prepared), and applications for or to register Trademark
or Copyrights, comprising the Transferred Intellectual Property, together with
all prosecution file history and other documentation with respect thereto that
is reasonably necessary for Purchaser to file, prosecute and maintain such
applications and registrations.
17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as otherwise set forth in the Purchaser Disclosure Schedule,
attached hereto as Schedule V, Purchaser hereby represents and warrants to
Seller that:
5.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full power and authority to carry on its businesses as now
conducted. Purchaser is duly qualified or licensed to do business as a foreign
corporation in each jurisdiction in which it is required to be so qualified or
licensed, except in such jurisdictions in which failure to be so qualified or
licensed would not have a material adverse effect on Purchaser.
5.2 Power, Authorization and Validity. Purchaser has the right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement and the Ancillary Agreements. The execution and delivery of this
Agreement and the Ancillary Agreements have been duly and validly approved and
authorized by the board of directors of Purchaser. No authorization or approval,
governmental or otherwise, is necessary in order to enable Purchaser to enter
into and to perform the terms of this Agreement or the Ancillary Agreements.
This Agreement is, and the Ancillary Agreements, when executed and delivered by
Purchaser shall be, the valid and binding obligations of Purchaser, enforceable
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles or the
exercise of judicial discretion in accordance with such principles.
5.3 No Conflict; Consents. The execution and the delivery of this
Agreement and the Ancillary Agreements do not, and the consummation or
performance by Purchaser of the transactions contemplated herein and therein and
compliance with the provisions hereof and thereof will not, conflict with,
contravene, result in a breach of, constitute a default (with or without notice
or lapse of time, or both) under or violation of, or give any party any right to
terminate, accelerate or cancel any provision of, (a) the charter documents of
Purchaser as currently in effect or any resolutions adopted by the shareholders,
the board of directors or any committee of the board of directors of Purchaser,
(b) any material agreement, instrument, contract or understanding to which
Purchaser is a party or by which Purchaser or any of its properties is bound, or
(c) any Law or Decree applicable to Purchaser. Except for consents,
authorizations, filings, approvals and registrations required under any
applicable Law or Decree which, if not obtained or made, would not have a
material adverse effect on Purchaser and would not prevent or materially alter
or delay the Transaction, no consent of any third party or any Governmental
Entity is required to be obtained on the part of Purchaser to permit the
consummation of the transactions contemplated in this Agreement or the Ancillary
Agreements.
5.4 Litigation. There are no Proceedings or investigations, pending or
threatened against Purchaser before any Governmental Entity which questions or
challenges the validity of this Agreement or any of the Ancillary Agreements, or
any of the transactions contemplated herein or therein.
5.5 Brokers. There is no broker, finder, investment banker or other
person whose fees are to be paid by Purchaser, who would have any valid claim
against Seller for a commission or brokerage fee or payment in connection with
this Agreement or the transactions contemplated herein as a result of any
agreement of, or action taken by Purchaser.
5.6 Purchase Price. Purchaser has, or will have as of the Closing Date,
adequate financial resources to consummate the transactions contemplated hereby
and to deliver to Seller the Purchase Price.
18
5.7 Accuracy of Material Facts. No representations, warranty or covenant
of Purchaser contained in this Agreement or in any certificate, schedule or
exhibit delivered pursuant to this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein and therein, taken as a whole, not misleading in
light of the circumstances in which such statement were made.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
6.1 Conduct of Business.
(a) During the period on and from the date of this Agreement
through and including the Closing Date, Seller will (i) conduct the Business in
the ordinary course consistent with past practices, (ii) use its reasonable
commercial efforts to retain Seller's employees employed in the Business and
designated as Key Employees or Prospective New Purchaser Employees, (iii) except
as otherwise provided in this Agreement, use its reasonable commercial efforts
to maintain and preserve intact relationships with all suppliers, customers,
landlords, licensors, licensees, employees, independent contractors and other
Persons having business relationships with the Business, and (iv) use its
reasonable commercial efforts promptly to repair, restore or replace any assets
related to the Business that are destroyed or damaged.
(b) Notwithstanding the foregoing, during the period on and from
the date of this Agreement through and including the Closing Date, Seller will
not without the prior written consent of Purchaser:
(i) mortgage, pledge, subject to a lien, or grant a
security interest in, or suffer to exist or otherwise encumber, any of the
Assets;
(ii) sell, dispose of or license any of the Assets to any
Person, except Inventory in the ordinary course of business, consistent with
past practices;
(iii) enter into any material contract relating to the
Business, or amend, terminate or waive any right under any Assumed Contract;
(iv) take any action or allow any action to be taken that
has a reasonable likelihood of diminishing in any material respect the value of
the Assets or interfere in any material respect with Purchaser's operation of
the Business after the Closing;
(v) declare or pay any bonus or declare or make any cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, benefits, or other compensation or remuneration payable to,
or accelerate any benefits available to, any of the Key Employees or Prospective
New Purchaser Employees outside the ordinary course of business, consistent with
past practices or pursuant to existing contractual arrangements existing as of
the date of this Agreement;
(vi) make any Tax election or take any action or allow any
action to be taken that is reasonably likely to prejudice any future Tax
elections related to the Assets;
(vii) commence or settle any Proceeding relating to the
Business;
19
(viii) fail to maintain the Tangible Assets in good
working condition and repair according to the standards it has maintained up to
the date of this Agreement, subject only to ordinary wear and tear; or
(ix) agree to do any of the things described in the
preceding clauses of this Section 6.1(b).
6.2 Access to Information. Until the Closing, Seller will allow
Purchaser and its agents reasonable access upon reasonable notice and during
normal working hours to the Business Records and facilities relating to the
Assets, the Assumed Liabilities and the Business. Until the Closing, Seller
shall cause its accountants to cooperate with Purchaser and its agents in making
available all relevant financial information requested with respect to the
Assets, the Assumed Liabilities and the Business.
6.3 Obtaining Necessary Consents and Addition of Purchaser as Party to
Certain Contracts. Seller will use its reasonable commercial efforts to obtain
the consents of any third parties or Governmental Entities necessary for (a) the
effective assignment to and assumption by Purchaser of the Assumed Contracts,
and (b) the consummation of the Transaction and the other transactions
contemplated hereby or by the Ancillary Agreements. All such consents shall be
in writing and executed counterparts thereof shall be delivered promptly to
Purchaser. To the extent that any Assumed Contract is not assignable without the
consent of another party, this Agreement shall not constitute an assignment or
an attempted assignment thereof, or thereunder, if such assignment or attempted
assignment would constitute a breach thereof until the necessary consents are
obtained. To the extent permitted by applicable law, in the event consents to
the assignment of the Assumed Contracts are not obtained by Seller as of the
Closing, such Assumed Contracts shall be held, as and from the Closing Date, by
Seller in trust for Purchaser, and the covenants and obligations thereunder
shall be performed by Purchaser in Seller's respective name and all benefits and
obligations existing thereunder shall be for Purchaser's account; provided,
however, that such performance by Purchaser shall be contingent on the passing
of all benefits of such Assumed Contracts to Purchaser. Seller shall not amend,
terminate or waive any right under any such Assumed Contract. Seller shall take
or cause to be taken such actions in its name or otherwise as Purchaser may
reasonably request so as to provide Purchaser with the benefits of the Assumed
Contracts and to effect collection of money or other consideration to become due
and payable under the Assumed Contracts, and Seller shall promptly pay over to
Purchaser all money or other consideration received by it in respect to all
Assumed Contracts.
6.4 Satisfaction of Conditions Precedent. Seller will use its reasonable
commercial efforts to satisfy or cause to be satisfied all the conditions
precedent to the Closing hereunder, and to cause the transactions contemplated
herein to be consummated, and, without limiting the generality of the foregoing,
to obtain all consents and authorizations of third parties and to make all
filings with, and give all notices to, third parties, which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
herein.
6.5 No Solicitation.
(a) During the period from and after the date hereof until the
earlier of the Closing Date or the termination of this Agreement in accordance
with Article XII, Seller shall not directly or indirectly, and shall not
authorize or permit any director, officer, employee, advisor (including, without
limitation, any investment bankers, attorneys or accountants) or agent of Seller
(each, a "Seller Representative") directly or indirectly to, (i) solicit,
initiate, intentionally encourage, facilitate or induce the making, submission
or announcement of any Acquisition Proposal, (ii) subject to the terms of the
immediately following sentence, participate in any negotiations regarding an
Acquisition Proposal, furnish to any Person any nonpublic information regarding
Seller to any Person in connection with or in
20
response to an Acquisition Proposal, or take any other action that could
reasonably be expected to lead to an Acquisition Proposal, (iii) subject to the
terms of the immediately following sentence, approve, endorse or recommend any
Acquisition Proposal, or (iv) subject to the terms of the immediately following
sentence, enter into any letter of intent, preliminary agreement or similar
document contemplating or otherwise relating to any Acquisition. Notwithstanding
the foregoing, prior to the adoption of this Agreement by the Required Seller
Shareholder Vote, this Section 6.5(a) shall not prohibit Seller from furnishing
nonpublic information regarding Seller to, or entering into or facilitating or
encouraging discussions with or negotiations with, any Person in response to an
unsolicited proposal reasonably expected to result in a Superior Proposal
submitted to Seller by such Person (and not withdrawn); entering into any letter
of intent, agreement or similar document with any Person contemplating or
otherwise relating to a proposal reasonably expected to result in a Superior
Proposal submitted to Seller by such Person (and not withdrawn); or withdrawing
or modifying the recommendation of Seller's board of directors that Seller's
shareholders vote to approve this Agreement and the Transaction and endorsing or
recommending that Seller's shareholders vote to approve a proposal reasonably
expected to result in a Superior Proposal submitted to Seller by any Person (and
not withdrawn); if (1) neither Seller nor any Seller Representative shall have
violated any of the restrictions set forth in this Section 6.5, (2) the board of
directors of Seller concludes in good faith, after having taken into account the
advice of its outside legal counsel, that such action is required in order for
the board of directors of Seller to comply with its fiduciary obligations to
Seller's shareholders under applicable Laws or Decree, and Seller notifies
Purchaser of such determination of its board of directors and provides Purchaser
with a true and complete copy of the Acquisition Proposal, (3) at least three
(3) business days prior to furnishing any such nonpublic information to, or
entering into discussions with, such Person, Seller gives Purchaser written
notice of the identity of such Person and of Seller's intention to furnish
nonpublic information to, or enter into discussions with, such Person, and (4)
prior to furnishing any such nonpublic information to such Person, Seller enters
into a confidentiality and nondisclosure agreement with such Person on terms at
least as restrictive on such Person, taken as a whole, as the Confidentiality
Agreement, and Seller furnishes such nonpublic information to Purchaser (to the
extent such nonpublic information has not been previously furnished by Seller to
Purchaser).
(b) Seller shall promptly advise Purchaser (and in any event
within 24 hours) orally and in writing of any Acquisition Proposal, any request
for information reasonably likely to lead to an Acquisition Proposal or any
request for nonpublic information relating to Seller (including the identity of
the Person making or submitting such Acquisition Proposal or request, and the
terms thereof) that is made or submitted by any Person prior to Closing.
(c) Seller shall immediately cease and cause to be terminated any
existing discussions, activities or negotiations with any Person that relate to
any Acquisition Proposal.
6.6 Proxy Statement. As promptly as practicable after the date of this
Agreement, Seller shall prepare and cause to be filed with the SEC the Proxy
Statement. Seller shall use all reasonable efforts to cause the Proxy Statement
to comply with the rules and regulations promulgated by the SEC and to respond
promptly to any comments of the SEC or its staff. Seller will use all reasonable
efforts to cause the Proxy Statement to be mailed to Seller's shareholders as
promptly as practicable. Purchaser shall promptly furnish to Seller all
information concerning Purchaser that may be required or reasonably requested in
connection with any action contemplated by this Agreement. If any event relating
to Seller occurs, or if Seller becomes aware of any information, that should be
disclosed in an amendment or supplement to the Proxy Statement, then Seller
shall promptly inform Purchaser thereof and shall file such amendment or
supplement with the SEC and, if appropriate, mail such amendment or supplement
to the shareholders of Seller. Notwithstanding the foregoing, prior to filing or
mailing the Proxy Statement (or any amendment or supplement thereto) or
responding to comments of the SEC with respect thereto, Seller (a) shall provide
Purchaser an opportunity to review and comment on all portions of such document
21
or response that contain information about the Purchaser and (b) shall include
in such document or response all comments as reasonably proposed by Purchaser
which, in the reasonable judgment of Seller, are required or appropriate to
include in such document.
6.7 Shareholders' Meeting.
(a) Seller shall take all action necessary under all applicable
legal requirements to call, give notice of and hold a meeting of the holders of
Seller's common stock to vote on a proposal to approve this Agreement and the
Transaction (the "Seller Shareholders' Meeting"). The Seller Shareholders'
Meeting shall be held (on a date selected by Seller in consultation with
Purchaser) as promptly as practicable.
(b) (i) The Proxy Statement shall include a statement to the
effect that the board of directors of Seller unanimously recommends that
Seller's shareholders vote to approve this Agreement and the Transaction at the
Seller Shareholders' Meeting (the unanimous recommendation of Seller's board of
directors that Seller's shareholders vote to adopt this Agreement being referred
to as the "Seller Board Recommendation"); and (ii) except pursuant to and in
compliance with Section 6.5(a), the Seller Board Recommendation shall not be
withdrawn or modified in a manner adverse to Purchaser, and no resolution by the
board of directors of Seller or any committee thereof to withdraw or modify the
Seller Board Recommendation in a manner adverse to Purchaser shall be adopted or
proposed.
6.8 Advise of Changes. Seller will promptly notify Purchaser in writing
of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of Seller contained in this Agreement, if
made on or as of the date of that event or the Closing Date, untrue or
inaccurate to the extent that the condition set forth in Section 9.3(a) shall
not be satisfied. No such notification under this Section 6.8 shall be deemed to
amend or supplement the Seller Disclosure Schedule for the purpose of
determining the accuracy of any representation, warranty or statement in this
Agreement (for the purposes of Article XI or otherwise) unless the Closing
occurs, in which case such notification shall be deemed to amend the Seller
Disclosure Schedule solely as to the matter described therein.
6.9 Transferred Inventory. For a period between ten (10) and five (5)
business days prior to the Closing Date, Purchaser shall be entitled to inspect
and perform quality assurance testing on the specific items of Transferred
Inventory to ensure that each such item of Transferred Inventory complies with
the specifications set forth on Schedule 6.9 (the "Quality Standards"). Subject
to the preceding sentence, the inspection and testing shall take place at such
times and locations as the parties may reasonably agree. Any specific item of
Transferred Inventory that does not meet such Quality Standards may, at the
Purchaser's sole option, be removed from the schedule of Transferred Inventory
and the Initial Purchase Price may be correspondingly reduced by the book value
of such item; provided, however, that Seller shall be allowed five (5) business
days to cure any non-compliance with the Quality Standards to the reasonable
satisfaction of Purchaser prior to any such reduction in the Initial Purchase
Price.
ARTICLE VII
PRE-CLOSING COVENANTS OF PURCHASER
7.1 Advise of Changes. Purchaser will promptly notify Seller in writing
of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of Purchaser contained in this Agreement,
if made on or as of the date of that event or the Closing Date, untrue or
inaccurate to the extent that the condition set forth in Section 9.2(a) shall
not be satisfied. No such notification under this Section 7.1 shall be deemed to
amend or supplement the Purchaser Disclosure Schedule for the purpose of
determining the accuracy of any representation, warranty or statement in this
22
Agreement (for the purposes of Article XI or otherwise) unless the Closing
occurs, in which case such notification shall be deemed to amend the Purchaser
Disclosure Schedule solely as to the matters described therein.
7.2 Satisfaction of Conditions Precedent. Purchaser will use its
reasonable commercial efforts to satisfy or cause to be satisfied all the
conditions precedent to the Closing hereunder, and to cause the transactions
contemplated herein to be consummated, and, without limiting the generality of
the foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated herein.
ARTICLE VIII
MUTUAL COVENANTS
8.1 Confidentiality and Publicity. The parties acknowledge that the
Confidentiality Agreement is binding upon the parties hereto and in full force
and effect, except to the extent that the provisions hereof supersede provisions
to similar effect contained in the Confidentiality Agreement. The terms of the
Confidentiality Agreement (exclusive of such superseded provisions) are
incorporated in this Agreement by this reference.
8.2 Regulatory Filings; Consents; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of Seller and Purchaser shall use
its respective reasonable commercial efforts to (a) make all necessary filings
with respect to the Transaction and this Agreement under the Securities Act, the
Exchange Act and applicable blue sky or similar securities laws and obtain
required approvals and clearances with respect thereto and supply all additional
information requested in connection therewith, (b) make appropriate filings with
federal, state, provincial or local governmental bodies or applicable foreign
governmental agencies and obtain required approvals and clearances with respect
thereto and supply all additional information requested in connection therewith
and (c) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated in this Agreement as promptly as
practicable.
8.3 Employment Matters.
(a) Key Employees. At or prior to the Closing Date, Purchaser
shall use its reasonable commercial efforts to enter into appropriate employment
documentation with each of the Key Employees, customary in scope and nature for
similarly situated employees of Purchaser. Seller agrees to use its reasonable
commercial efforts to retain the Key Employees, and shall notify Purchaser
promptly if, notwithstanding the foregoing, any Key Employee submits a
resignation to terminate employment or terminates employment prior to the
Closing Date.
(b) Prospective New Purchaser Employees. At or prior to the
Closing Date, an offer of employment shall be made by Purchaser to each of the
Prospective New Purchaser Employees. Each such Prospective New Purchaser
Employee will be offered employment at a salary comparable to similarly situated
employees of Purchaser, as determined by Purchaser. Each Prospective New
Purchaser Employer who accepts the Purchaser's offer of employment (each, a
"Continuing Employee") shall be eligible to participate in the Purchaser's
benefit plans (such as medical benefits, bonuses, 401(k) and stock options) on
the same basis as other individuals beginning employment with Purchaser as a
newly-hired employee, provided that each Continuing Employee shall be given
credit for his or her period of continuous service with the Seller prior to the
Closing Date solely for the purpose of such individual's vacation accrual level
under Purchaser's standard policy. Seller agrees to use its reasonable
commercial efforts to retain the Prospective New Purchaser Employees, and shall
notify Purchaser promptly if,
23
notwithstanding the foregoing, any Prospective New Purchaser Employee submits a
resignation to terminate employment or terminates employment prior to the
Closing Date. For each Prospective New Purchaser Employee who declines
Purchaser's offer of employment prior to the Closing Date (a "Declining
Employee"), Purchaser may make an offer of employment to any additional employee
of Seller not listed as a Prospective New Purchaser Employee, excluding those
employees who work in the Libra Business or for Libra Networks, (each, a
"Substitute Prospective New Purchaser Employee"). Purchaser's offer of
employment to each Substitute Prospective New Purchaser Employee shall be
subject to the consent of Seller, such consent not to be unreasonably withheld.
In the event that a Substitute Prospective New Purchaser Employee accepts
Purchaser's offer of employment, such Substitute Prospective New Purchaser
Employee's acceptance shall be deemed an acceptance of employment by a
Prospective New Purchaser Employee for the purposes of Section 9.3(l) and the
Declining Employee shall be excluded from any calculation required under Section
9.3(l).
8.4 Further Assurances. Prior to and following the Closing, each party
to this Agreement agrees to cooperate fully with the other party and to execute
such further instruments, documents and agreements, and to give such further
written assurances, as may be reasonably requested by any other party to better
evidence and reflect the transactions described herein and the Ancillary
Agreements and contemplated herein and therein and to carry into effect the
intent and purposes of this Agreement.
8.5 Non-Competition and Non-Solicitation. The Seller hereby covenants
and agrees that, until two (2) years from the Closing Date (the "Restricted
Period"), Seller shall not compete with Purchaser or its Affiliates in the
Business. The Seller hereby covenants and agrees that, until the end of the
Restricted Period, Seller will not, directly or indirectly, take any of the
following actions with respect to the Business: (a) solicit or divert any
business or clients or customers made known to it by Purchaser or its Affiliates
away from Purchaser or its Affiliates; (b) induce customers, clients, suppliers,
agents or other persons under contract or otherwise associated or doing business
with Purchaser or its Affiliates to reduce or alter any such association or
business with Purchaser or its Affiliates; and/or (c) knowingly solicit any
person in the employment of Purchaser or its Affiliates to (i) terminate such
employment and/or (ii) accept employment, or enter into any consulting
arrangement, with any person or entity other than Purchaser and/or its
controlled affiliates; provided, however, that nothing in this Section 8.5 shall
prohibit Seller from hiring employees of Purchaser who independently initiate
contact with, or solicit employment from, Seller.
8.6 Taxes.
(a) Seller shall be liable for and shall pay all Taxes (whether
assessed or unassessed) applicable to the Assets in each case attributable to
periods (or portions thereof) ending on or prior to the Closing Date. Purchaser
shall be liable for and shall pay all Taxes (whether assessed or unassessed)
applicable to the Assets in each case attributable to periods (or portions
thereof) beginning after the Closing Date. For purposes of this paragraph (a),
any period beginning before and ending after the Closing Date shall be treated
as two partial periods, one ending on the Closing Date and the other beginning
after the Closing Date except that Taxes (such as property Taxes) imposed on a
periodic basis shall be allocated on a daily basis.
(b) Notwithstanding Section 8.6(a), any sales tax, use tax, gross
receipts tax, real property transfer or gains Tax, documentary stamp Tax or
similar Tax attributable to the sale or transfer of the Assets shall be paid by
Seller. Purchaser and Seller agree to timely sign and deliver such certificates
or forms as may be necessary or appropriate to establish an exemption from or
otherwise reduce), or make a report with respect to, such Taxes.
24
(c) Seller or Purchaser, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of Section
8.6(a). Within a reasonable time prior to the payment of any said Tax the party
paying such Tax shall give notice to the other party of the Tax payable and the
portion which is the liability of each party, although failure to do so will not
relieve the other party from its liability hereunder.
8.7 Transition Services Agreement. At or prior to the Closing, the
parties shall enter into a transition services agreement in substantially the
form attached hereto as Exhibit A (the "Transition Services Agreement").
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligations. The respective obligations
of each party to this Agreement to effect the transactions to be performed by
such party at the Closing are, at the option of such party, subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) No Orders. No order shall have been entered, and not vacated,
by a court or administrative agency of competent jurisdiction, in any action or
proceeding which enjoins, restrains or prohibits the Transaction or the
consummation of any other transaction contemplated herein. There shall not be
any Law or Decree enacted or deemed applicable to the Transaction that makes
consummation of the Transaction illegal.
(b) Permits, Authorizations and Approvals. All permits,
authorizations, approvals, consents, filings and orders required to be obtained
or made under all applicable Laws or Decrees in connection with the transactions
contemplated herein, including but not limited to any applicable consent or
termination of any applicable waiting period under any Law, shall have been
obtained or made, as applicable, and shall be in full force and effect at the
Closing Date.
(c) No Litigation. There shall not be pending or threatened any
Proceeding (i) in which a Governmental Entity is or is threatened to become a
party and neither Purchaser nor Seller shall have received any communication
from any Governmental Entity in which (A) an injunction is or may be sought
against the transactions contemplated herein or (B) relief is or may be sought
against any party hereto as a result of this Agreement and in which such
Proceeding, if successful, would have a Material Adverse Effect upon such party,
or (ii) in which a Person (other than a Governmental Entity) is or is threatened
to become a party in which there is a reasonable possibility of an outcome that
would result in material Losses upon either party or other relief that would
have a Material Adverse Effect.
(d) Shareholder Approval. The Requisite Seller Shareholder Vote
shall have been obtained.
9.2 Conditions to Obligations of Seller. The obligations of Seller to
effect the transactions to be performed by it at the Closing are, at the option
of Seller, subject to the satisfaction at or prior to the Closing of the
following additional conditions:
(a) Representations and Warranties. All representations and
warranties of Purchaser set forth in Article V hereof that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of Purchaser set forth in Article V hereof shall
be true and correct in all material respects, in each case on and as of the
Closing Date, except to the extent such representations and warranties are
specifically made as of a particular date or as of the date hereof, with the
same force and effect as if such representations and warranties had been made at
the Closing, and
25
Purchaser shall have delivered to Seller a certificate (the "Purchaser
Compliance Certificate") to such effect dated as of the Closing Date and signed
by the President of Purchaser, respectively.
(b) Performance. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Purchaser, at or prior to
the Closing shall have been duly complied with and performed in all material
respects, and Purchaser shall have delivered to Seller the Purchaser Compliance
Certificate to such effect.
(c) Initial Purchase Price. Purchaser shall have delivered the
Initial Purchase Price in accordance with Section 2.6 hereof.
(d) Transition Services Agreement. Purchaser shall have executed
and delivered to Seller the Transition Services Agreement.
(e) Opinion of Financial Advisor. Seller shall have received the
opinion of Needham & Co., Inc. to the effect that, as of September 2, 2002, the
Transaction is fair from a financial point of view to Seller.
(f) Conveyance Documents. Purchaser shall have executed and
delivered the applicable Conveyance Documents which require the accession or
acknowledgment of Purchaser to be effective.
(g) Secretary's Certificate. Purchaser shall have delivered a
certificate, signed by the Secretary of Purchaser certifying as to and accuracy
of, and attaching copies of, Purchaser's charter documents and all board of
directors resolutions adopted in connection with the Transaction.
9.3 Conditions to Obligations of Purchaser. The obligations of Purchaser
to effect the transactions to be performed by it at the Closing are, at the
option of Purchaser, subject to the satisfaction at or prior to the Closing of
the following additional conditions:
(a) Representations and Warranties. All representations and
warranties of Seller set forth in Article IV hereof that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of Seller set forth in Article IV hereof shall be
true and correct in all material respects, in each case on and as of the Closing
Date, except to the extent such representations and warranties are specifically
made as of a particular date or as of the date hereof, with the same force and
effect as if such representations and warranties had been made at the Closing,
and Seller shall have delivered to Purchaser a certificate (the "Seller
Compliance Certificate") to such effect dated as of the Closing Date and signed
by the President of Seller.
(b) Performance. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Seller at or prior to the
Closing shall have been duly complied with and performed in all material
respects, and Seller shall have delivered to Purchaser the Seller Compliance
Certificate to such effect.
(c) Material Adverse Change. There shall have been no Material
Adverse Change relating to the Assumed Liabilities, the Assets or the Business.
(d) Transition Services Agreement. Seller shall have executed and
delivered to Purchaser the Transition Services Agreement.
26
(e) Conveyance Documents. Seller shall have delivered to
Purchaser a bill of sale, intellectual property assignments, assignments and
assumptions of contracts and such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance reasonably
satisfactory to counsel to Purchaser as shall be legally sufficient to vest in
Purchaser good title to the Assets (including the Assumed Contracts and
Transferred Intellectual Property) (collectively, the "Conveyance Documents").
(f) Secretary's Certificate. Seller shall have delivered a
certificate, signed by the Secretary of Seller, certifying as to the truth and
accuracy of, and attaching copies of, Seller's charter documents and board of
directors and shareholder resolutions adopted in connection with the
Transaction.
(g) Notification of Termination of Distribution Agreements.
Seller shall have delivered, to the reasonable satisfaction of Purchaser,
written evidence of notification of termination of all distribution agreements
and sales representative agreements relating to the Business (other than those
which are Assumed Contracts) in accordance with their respective terms, with
such termination to be effective within the minimum notice period required
pursuant to such agreements.
(h) Required Consents. Seller shall have delivered, to the
reasonable satisfaction of Purchaser, written evidence of the consents of third
parties to assignment of those Contracts listed on Schedule 9.3(h), together
with the documents and information specified on Schedule 9.3(h).
(i) Tax Affidavit. Seller shall have delivered a signed affidavit
stating, under penalty of perjury, (1) Seller's United States taxpayer
identification number, and (2) that Seller is not a foreign person pursuant to
Section 1445(b)(2) of the Code.
(j) Opinion of Counsel. Purchaser shall have received from
counsel to Seller an opinion letter substantially in form and substance as set
forth in Exhibit B attached hereto, with qualifications and assumptions
reasonably satisfactory to Purchaser, addressed to Purchaser, and dated as of
the Closing Date.
(k) Key Employees. The Key Employees shall have accepted
employment offers from, and shall not have expressed an intention to terminate
their employment with, Purchaser.
(l) Prospective New Purchaser Employees. At least fifty percent
(50%) percent of the Prospective New Purchaser Employees shall have accepted
employment offers from, and shall not have expressed an intention to terminate
their employment with, Purchaser.
(m) Condition of Transferred Inventory. At least ninety-five
percent (95%) of the Transferred Inventory shall have satisfied the Quality
Standards described in Section 6.9.
ARTICLE X
POST-CLOSING MATTERS
10.1 Further Assurances of Seller. Seller shall, from time to time, at
the request of Purchaser, and without further consideration, execute and deliver
such instruments of transfer, conveyance and assignment in addition to the
Conveyance Documents, and take such other actions, as may be reasonably
necessary to assign, transfer, convey and vest in Purchaser, and to put
Purchaser in possession of, the Assets, including but not limited to obtaining
any and all required consents of third parties which Seller has not obtained as
of the Closing Date. Seller shall use its reasonable commercial efforts to
obtain for Purchaser any and all consents of third parties which Seller has not
obtained as of the Closing Date.
27
Seller shall promptly deliver to Purchaser any notices or communications
received by Seller from the various patent offices before which patents that are
Assets are pending or were issued.
10.2 Further Assurances of Purchaser. Purchaser shall, from time to time
at the request of Seller, and without further consideration, execute and deliver
such instruments of assumption, and take such other action, as may be reasonably
necessary to effectively confirm the assumption by Purchaser of the Assumed
Liabilities.
10.3 License Grant. Notwithstanding anything to the contrary herein,
Seller hereby grants to Purchaser a royalty-free, fully-paid, worldwide,
transferable license to use, and sublicense to its Affiliates, contractors, and
agents (including, without limitation, distributors, resellers and marketing
agents), for use, the Trademarks of Seller for the limited purpose of marketing,
distributing and selling the Transferred Inventory, effective only from and
after Closing and until such time as all Transferred Inventory has been sold or
otherwise disposed of by Purchaser (or its Affiliates) to unaffiliated third
parties.
10.4 Certain Documentation and Information. On or before the fifth (5th)
business day following the Closing, Seller shall deliver to Purchaser the
Business Records, including, without limitation, the documents described in the
last sentence of Section 4.18. On or before the ninetieth (90th) day following
the Closing, Seller shall deliver to Purchaser all original customer purchase
orders related to the warranty, repair, support and code test installation
obligations assumed by Purchaser under Section 2.4(a). Prior to the delivery of
such customer purchase orders, Seller shall, at its own cost and promptly upon
the reasonable request of Purchaser, deliver copies of any such customer
purchase orders.
ARTICLE XI
INDEMNIFICATION
11.1 Survival of Representations and Warranties.
(a) The representations and warranties made by Seller or
Purchaser herein, or in any certificate, schedule or exhibit delivered pursuant
hereto, shall in no manner be limited by any investigation of the subject matter
thereof made by or on behalf of either party or by the waiver or satisfaction of
any condition to closing and shall survive the Closing and continue in full
force and until 5:00 p.m. Pacific Time on the 365th day after the Closing Date
(the "Indemnification Period"); provided, however, that the representations set
forth in Sections 4.4 (Title to Assets), 4.5 (Compliance with Laws) and 4.13
(Taxes) shall survive until the expiration of the statute of limitations
applicable to claims with respect to matters covered thereby; provided, further,
that, notwithstanding the foregoing, the representations set forth in Section
4.13 (Taxes) shall survive until the date that is sixty (60) days after such
expiration, including any and all waivers and extensions thereof.
(b) The obligations of Seller to indemnify Purchaser Indemnitees
for any indemnifiable Losses is subject to the condition that Seller shall have
received a Claim Notice for all Purchaser Indemnifiable Losses for which
indemnity is sought prior to the expiration of the Indemnification Period. For
purposes of this Agreement, a "Claim Notice" relating to a particular
representation or warranty shall be deemed to have been given if a Purchaser
Indemnitee, acting in good faith, delivers to Seller a written notice stating
that such Purchaser Indemnitee believes that there is or has been a possible
breach of such representation or warranty and containing (i) a brief description
of the circumstances supporting such Purchaser Indemnitee's belief that there is
or has been such a possible breach and (ii) a non-binding, preliminary estimate
of the aggregate dollar amount of the actual and potential Losses that have
arisen and may arise as a result of such possible breach.
28
11.2 Indemnification by Seller.
(a) Subject to the terms and conditions of this Article XI,
Seller agrees to indemnify, defend and hold harmless Purchaser Indemnitees from,
against, and shall compensate and reimburse each Purchaser Indemnitee for and in
respect of any and all Losses asserted against, relating to, imposed upon or
incurred by any Purchaser Indemnitee by reason of, resulting from, based upon or
arising out of, whether directly or indirectly, (i) the breach, inaccuracy,
untruth or incompleteness of any representation or warranty of Seller contained
in or made pursuant to this Agreement, any Ancillary Agreement or any
certificate, schedule or exhibit delivered by Seller in connection with this
Agreement or any Ancillary Agreement, (ii) the breach of any covenant or
obligation of Seller set forth in this Agreement or any Ancillary Agreement,
(iii) any Liability of Seller other than the Assumed Liabilities, (iv) any
matter identified or referred to in Schedule 11.2, (v) any Liability to which
Purchaser Indemnitees may become subject and that arises from or relates to the
failure to comply with any bulk transfer law or similar Laws in connection with
the Transaction, or (vi) any Proceeding relating to any breach, alleged breach,
Liability or matter of the type referred to above (including any Proceeding
commenced by any Purchaser Indemnitee for the purpose of enforcing any of its
rights under this Article XI) (collectively, "Purchaser Indemnifiable Losses").
(b) Notwithstanding anything to the contrary contained in this
Agreement, no claim for Purchaser Indemnifiable Losses shall be made under this
Article XI: (i) unless Seller receives a Claim Notice during the Indemnification
Period, (ii) unless the aggregate of Purchaser Indemnifiable Losses shall exceed
$50,000 (at which point Seller shall become liable for the aggregate Losses, and
not just amounts in excess of $50,000), (iii) for any Losses to the extent that
the Purchaser Indemnitees have received payments in respect of claims made under
this Article XI in excess of $3,300,000 in the aggregate, (iv) to the extent the
Purchaser had a reasonable opportunity, but failed, in good faith to mitigate
the Losses, including but not limited to the failure to use commercially
reasonable efforts to recover under a policy of insurance or under a contractual
right of set-off or indemnity, or (v) with respect to any Losses suffered,
incurred or sustained by any Purchaser Indemnitee or to which any of them
becomes subject to the extent such Losses arise from or were directly caused by
actions taken or failed to be taken by Purchaser or any of its Affiliates after
the Closing. The Purchaser Indemnitees' sole and exclusive remedy against Seller
for Losses shall be indemnification under this Article XI; provided, however,
that nothing contained in this Section 11.2(b) shall limit any remedy at law or
equity to which Purchaser may be entitled against Seller for fraud or
intentional misrepresentation.
11.3 Indemnification by Purchaser.
(a) Subject to the terms and conditions of this Article XI,
Purchaser agrees to indemnify, defend and hold harmless Seller Indemnitees from,
against, and shall compensate and reimburse each Seller Indemnitee for and in
respect of any and all Losses asserted against, relating to, imposed upon or
incurred by any Seller Indemnitee by reason of, resulting from, based upon,
arising out of, whether directly or indirectly, (i) the breach, inaccuracy,
untruth or incompleteness of any representation or warranty of Purchaser
contained in or made pursuant to this Agreement, any Ancillary Agreement or any
certificate, schedule or exhibit delivered by Purchaser in connection with this
Agreement or any Ancillary Agreement, (ii) the breach of any covenant or
obligation of Purchaser set forth in this Agreement or any Ancillary Agreement,
(iii) any Liability of Purchaser other than the Assumed Liabilities, or (iv) any
Proceeding relating to any breach, alleged breach, Liability or matter of the
type referred to above (including any Proceeding commenced by any Seller
Indemnitee for the purpose of enforcing any of its rights under this Article XI)
(collectively, "Seller Indemnifiable Losses"):
(b) Notwithstanding anything to the contrary contained in this
Agreement, no claim for Seller Indemnifiable Losses shall be made under this
Article XI: (i) unless the aggregate of Seller
29
Indemnifiable Losses shall exceed $50,000 (at which point Purchaser shall become
liable for the aggregate Losses, and not just amounts in excess of $50,000),
(ii) to the extent the Seller had a reasonable opportunity, but failed, in good
faith to mitigate the Losses, including but not limited to the failure to use
commercially reasonable efforts to recover under a policy of insurance or under
a contractual right of set-off or indemnity, (iii) for any Losses to the extent
that the Seller Indemnitees have received payments in respect of claims made
under this Article XI in excess of $3,300,000 in the aggregate, or (iv) with
respect to any Losses suffered, incurred or sustained by any Seller Indemnitee
or to which any of them becomes subject to the extent such Losses arise from or
were directly caused by actions taken or failed to be taken by Seller after the
Closing. The Seller Indemnitees' sole and exclusive remedy against Purchaser for
Losses shall be indemnification under this Article XI; provided, however, that
nothing contained in this Section 11.3(b) shall limit any remedy at law or
equity to which Seller may be entitled against Purchaser for fraud or
intentional misrepresentation
11.4 Third-Party Claims. Should any claim be made, or suit or proceeding
(including, without limitation, a binding arbitration or an audit by any taxing
authority) be instituted against a Purchaser Indemnitee or Seller Indemnitee
which, if prosecuted successfully, would be a matter for which Purchaser
Indemnitee or Seller Indemnitee is entitled to indemnification under this
Agreement (a "Third Party Claim"), the obligations and liabilities of the
parties hereunder with respect to such Third Party Claim shall be subject to the
following terms and conditions:
(a) The Person claiming indemnification under this Agreement (the
"Indemnified Person") shall give the indemnifying party (the "Indemnifying
Party") written notice of any such Third Party Claim promptly after receipt by
such Indemnified Person of notice thereof. Any delay in giving notice hereunder
which does not materially prejudice the Indemnifying Party shall not affect the
Indemnified Person's rights to indemnification hereunder. The Indemnifying Party
may, at its option, (i) undertake control of the defense thereof by counsel of
its own choosing, or (ii) decline to assume control of but participate in the
defense thereof. If the Indemnifying Party assumes control of the defense
thereof, (i) such Indemnifying Party will be precluded from disputing its
obligations under this Agreement to indemnify the Indemnified Party and (ii) the
Indemnified Person may participate in the defense through its own counsel at its
own expense. If the Indemnifying Party declines to control but elects to
participate in the defense thereof, the Indemnified Person may control the
defense and have its expenses promptly reimbursed by the Indemnifying Party.
(b) Seller and Purchaser shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing
employees as may be reasonably necessary for the preparation of the defense of
any such Third Party Claim or for testimony as witness in any proceeding
relating to such claim.
(c) Unless an Indemnifying Party has failed to fulfill its
obligations under this Article XI, no settlement by an Indemnified Person of a
Third Party Claim shall be made without the prior written consent by or on
behalf of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. If the Indemnifying Party has assumed the defense of a
Third Party Claim as contemplated by Section 11.4(a), the Indemnifying Party may
settle such Third Party Claim so long as terms includes full release of all
claims against the Indemnified Person.
11.5 Limitations.
(a) The initial source for the Purchaser Indemnitees to collect
any Losses for which they may be entitled to indemnification under this Article
XI shall be to set off and retain such Losses against and from the Holdback
Amount. To the extent that the Losses for which the Purchaser Indemnitees may
seek indemnity under this Article XI are not set off against the Holdback Amount
30
pursuant to the preceding sentence, the Purchaser Indemnitees shall have the
right to recover such remaining Losses from Seller in accordance with the rights
and remedies otherwise provided in this Agreement and/or available under
applicable law.
(b) Nothing in this Agreement shall limit the Liability of any
Person to any other party for fraud or willful misconduct.
(c) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL,
COLLATERAL OR PUNITIVE DAMAGES IN CONNECTION WITH ANY CLAIMS, LOSSES, DAMAGES OR
INJURIES ARISING OUT OF THE CONDUCT OF THE PARTIES PURSUANT TO THIS AGREEMENT.
11.6 Distribution of Holdback Amount. On the first business day
following the expiration of the Indemnification Period, the Holdback Amount,
less (a) any amounts which as of such date have been (i) applied to the
resolution of any matter referenced in any Claim Notice or (ii) set-off pursuant
to Schedule 2.6, less (b) any amounts which as of such date are subject to any
pending Claim Notice, shall be due and payable to Seller. On such date,
Purchaser shall deliver such portion of the Holdback Amount by wire transfer of
immediately available funds to an account designated in writing by Seller. Upon
resolution of any matter referenced in any Claim Notice, Purchaser shall deliver
the applicable remaining portion of the Holdback Amount (reduced by any amounts
which have been applied to the resolution of any matter referenced in any Claim
Notice), if any, to Seller. No interest shall be paid or accrue on the Holdback
Amount or any portion thereof payable to Seller pursuant to this Section 11.6.
ARTICLE XII
TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated prior to the Closing
(whether before or after approval of this Agreement by Seller's shareholders):
(a) by mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Closing shall not have
occurred by November 30, 2002 or, in the event of a review of the Proxy
Statement by the SEC, December 31, 2002 (unless the failure to consummate the
Transaction is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Closing);
(c) by either Purchaser or Seller if a court of competent
jurisdiction or other Governmental Entity shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transaction;
(d) by either Purchaser or Seller if (i) the Seller Shareholders'
Meeting (including any adjournments and postponements thereof) shall have been
held and completed and Seller's shareholders shall have taken a final vote on a
proposal to adopt this Agreement, and (ii) this Agreement shall not have been
adopted at such meeting by the Required Seller Shareholder Vote (and shall not
have been adopted at any adjournment or postponement thereof); provided,
however, that a party shall not be permitted to terminate this Agreement
pursuant to this Section 12.1(d) if the failure to obtain such shareholder
approval is attributable to a failure on the part of such party to perform any
material obligation required to be performed by such party at or prior to the
Closing;
31
(e) by Purchaser (at any time prior to the adoption of this
Agreement by the Required Seller Shareholder Vote) if a Seller Triggering Event
shall have occurred;
(f) by Purchaser if (i) any of Seller's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement, such that the condition set forth in Section 9.3(a)
would not be satisfied, or (ii) any of Seller's covenants contained in this
Agreement shall have been breached such that the condition set forth in Section
9.3(b) would not be satisfied; provided, however, that Purchaser may only
terminate this Agreement pursuant to this Section 12.1(f) if such inaccuracy or
breach shall not have been cured within thirty (30) days after receipt by Seller
of written notice of such inaccuracy or breach; or
(g) by Seller if (i) any of Purchaser's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement, such that the condition set forth in Section 9.2(a)
would not be satisfied, or (ii) if any of Purchaser's covenants contained in
this Agreement shall have been breached such that the condition set forth in
Section 9.2(b) would not be satisfied; provided, however, that Seller may only
terminate this Agreement pursuant to this Section 12.1(g) if such inaccuracy or
breach shall not have been cured within thirty (30) days after receipt by
Purchaser of written notice of such inaccuracy or breach.
12.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 12.1, this Agreement shall be of no further
force or effect; provided, however, that (a) the provisions of Section 8.1
(Confidentiality), this Section 12.2, Section 12.3 (Expenses; Termination Fees),
and Article XIII shall survive the termination of this Agreement and shall
remain in full force and effect, and (b) the termination of this Agreement shall
not relieve any party from any liability for any breach of any representation,
warranty or covenant contained in this Agreement.
12.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 12.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel), whether or not the Transaction is consummated;
provided, however, that in the event that the Agreement is terminated pursuant
to Section 12.1(d) and, at or prior to the Seller Shareholders' Meeting, a
Superior Proposal shall not have been disclosed, announced, commenced, submitted
or made to the board of directors of Seller, then promptly following such
termination, Seller shall reimburse Purchaser, in cash, by wire transfer of
immediately available funds to an account designated by Purchaser, for the
reasonable fees and expenses incurred by Purchaser in connection with the
Agreement and the transactions contemplated hereby, up to an aggregate of
$75,000.
(b) If this Agreement is terminated by (i) either party pursuant
to Section 12.1(d) and at or prior to the Seller Shareholders' Meeting, a
Superior Proposal shall have been disclosed, announced, commenced, submitted or
made to the board of directors of Seller, and is still pending and not withdrawn
at the time of the Seller Shareholders' Meeting, or (ii) by Purchaser pursuant
to Section 12.1(e), then, promptly following such termination, Seller shall pay
to Purchaser, in cash, by wire transfer of immediately available funds to an
account designated by Purchaser, an amount of $99,000.
ARTICLE XIII
GENERAL
32
13.1 Governing Law and Jurisdiction. The parties agree that this
Agreement, and any disputes arising under this Agreement, will be governed by
and construed in accordance with the laws of the state of Washington or, in the
case of disputes involving Intellectual Property covered by this Agreement,
applicable U.S. law, state law or other law governing such Intellectual
Property, without giving effect to any conflict of laws principle to the
contrary. Subject to Section 13.2, the parties agree that venue for any dispute
arising under this Agreement will lie exclusively in the state or federal courts
located in Cook County, Illinois, and the parties irrevocably waive any right to
raise forum non conveniens or any other argument that Illinois is not the proper
venue. Subject to Section 13.2, the parties irrevocably consent to personal
jurisdiction in the state and federal courts of the state of Illinois.
13.2 Amicable Resolution. The parties mutually desire that friendly
collaboration will develop between themselves. Accordingly, they shall try to
resolve in a friendly manner all disagreements and misunderstandings connected
with the respective rights and obligations under this Agreement. To the extent
that any misunderstanding or dispute which arises after the Closing Date cannot
be resolved in a friendly manner (other than misunderstandings or disputes
involving Intellectual Property covered by this Agreement), the dispute will be
mediated by a mutually-acceptable mediator to be chosen by the parties within 45
days after written notice by one party to the other demanding mediation. Neither
party may unreasonably withhold consent to the selection of the mediator;
however, by mutual agreement, the parties may postpone mediation until each has
completed specified but limited discovery with respect to a dispute. The parties
may also agree to utilize some other form of alternative dispute resolution in
lieu of mediation, including by way of example and without limitation, neutral
fact-finding or a mini-trial. Any dispute that the parties cannot resolve
through negotiation, mediation or other form of alternative dispute resolution
within six (6) months of the date of the initial demand for it by one of the
parties may then be submitted to the courts for resolution pursuant to Section
13.1. The use of any alternative dispute resolution procedures will not be
construed under the doctrine of laches, estoppel or waiver to adversely affect
the rights of either party. Nothing in this Section 13.2 shall prevent either
party from resorting to judicial proceedings if (a) good faith efforts to
resolve the dispute under these procedures have been unsuccessful, or (b)
interim relief from a court is necessary to prevent serious and irreparable
injury to one party or the other.
13.3 Assignment; Binding upon Successors and Assigns. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
13.4 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement with a
valid and enforceable provision which will achieve, to the extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
13.5 Entire Agreement. This Agreement, the Ancillary Documents, and
each exhibit, schedule, certificate appended hereto and thereto or referenced
herein or therein, and the Confidentiality Agreement constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto.
33
13.6 Counterparts. This Agreement may be executed in any number of
counterparts, including counterparts transmitted by facsimile, each of which
shall constitute an original and all of which together shall constitute one and
the same instrument.
13.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
13.8 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
13.9 Notices. All notices and other communications hereunder will be in
writing and will be deemed given (a) upon receipt if delivered personally (or if
mailed by registered or certified mail), (b) the day after dispatch if sent by
overnight courier, (c) upon dispatch if transmitted by telecopier or other means
of facsimile transmission (and confirmed by a copy delivered in accordance with
clause (a) or (b)), properly addressed to the parties at the following
addresses:
Seller: Applied Microsystems Corporation
5020 148th Avenue N.E.
Redmond, WA 98052-5172
Attn: Stephen J. Verleye
Facsimile: (425) 869-0189
with a required copy to: Gray Cary Ware & Freidenrich LLP
701 Fifth Avenue, Suite 7000
Seattle, WA 98104-7044
Attention: John M. Steel, Esq.
Facsimile: (206) 839-4801
Purchaser: Metrowerks Corporation
9801 Metric Boulevard
Austin, TX 78758
Attention: Chief Executive Officer
Facsimile: (512) 997-4901
with a required copy to: Law Department
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, IL 90196
Attn: General Counsel
Facsimile: (847) 576-3750
Either party may change its address for such communications by giving
notice thereof to the other party in conformity with this Section 13.9.
13.10 Construction and Interpretation of Agreement.
34
(a) This Agreement has been negotiated by the parties hereto and
their respective attorneys, and the language hereof shall not be construed for
or against either party by reason of its having drafted such language.
(b) The titles and headings herein are for reference purposes
only and shall not in any manner limit the construction of this Agreement, which
shall be considered as a whole.
(c) As used in this Agreement, any reference to any state of
facts, event, change or effect being "material" with respect to any entity means
a state of facts that is material to the current condition (financial or
otherwise), properties, assets, liabilities, business or operations of such
entity. Whenever the term "enforceable in accordance with its terms" or like
expression is used in this Agreement, it is understood that excepted therefrom
are any limitations on enforceability under applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditor's rights.
13.11 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section.
13.12 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, Affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
[Remainder of Page Intentionally Left Blank]
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PURCHASER:
METROWERKS CORPORATION,
a Texas corporation
By: /s/ Jim Welch
-----------------------------------------
Title: President and CEO
--------------------------------------
SELLER:
APPLIED MICROSYSTEMS CORPORATION,
a Washington corporation
By: /s/ Stephen J. Verleye
-----------------------------------------
Title: President and CEO
--------------------------------------
36
INDEX OF SCHEDULES
Schedule No. Title
------------ -----
Schedule 1.8 Assumed Contracts
Schedule 1.24 Excluded Assets
Schedule 1.35 Key Employees
Schedule 1.44 Miscellaneous Assets
Schedule 1.48 Permitted Encumbrances
Schedule 1.50 Prospective New Purchaser Employees
Schedule 1.76 Tangible Assets
Schedule 1.85 Transferred Inventory
Schedule 2.4 Certain Assumed Liabilities
Schedule IV Seller Disclosure Schedule
Schedule V Purchaser's Disclosure Schedule
Schedule 9.3(h) Required Consents
Schedule 11.2 Certain Purchaser Indemnifiable Losses
INDEX OF EXHIBITS
Exhibit Title
------- -----
Exhibit A Form of Transition Services Agreement
Exhibit B Opinion of Seller's Counsel
TABLE OF CONTENTS
Page
----
ARTICLE I: DEFINITIONS................................................................ 1
1.1 "Acquisition".............................................................. 1
1.2 "Acquisition Proposal"..................................................... 2
1.3 "Affiliate"................................................................ 2
1.4 "Agreement"................................................................ 2
1.5 "Allocation Schedule"...................................................... 2
1.6 "Ancillary Agreements"..................................................... 2
1.7 "Assets"................................................................... 2
1.8 "Assumed Contracts"........................................................ 2
1.9 "Assumed Liabilities"...................................................... 2
1.10 "Business"................................................................. 2
1.11 "Business Records"......................................................... 2
1.12 "Claim Notice"............................................................. 2
1.13 "Closing".................................................................. 2
1.14 "Closing Date"............................................................. 2
1.15 "Code"..................................................................... 2
1.16 "Confidentiality Agreement"................................................ 2
1.17 "Continuing Employee"...................................................... 2
1.18 "Contracts"................................................................ 2
1.19 "Conveyance Documents"..................................................... 3
1.20 "Copyrights"............................................................... 3
1.21 "Declining Employee"....................................................... 3
1.22 "Encumbrances"............................................................. 3
1.23 "Exchange Act"............................................................. 3
1.24 "Excluded Assets".......................................................... 3
1.25 "Excluded Liabilities"..................................................... 3
1.26 "Governmental Entity"...................................................... 3
1.27 "Holdback Amount".......................................................... 3
1.28 "Indemnification Period"................................................... 3
1.29 "Indemnified Person"....................................................... 3
1.30 "Indemnifying Party"....................................................... 3
1.31 "Initial Purchase Price"................................................... 3
1.32 "Intangibles".............................................................. 3
1.33 "Intellectual Property".................................................... 3
1.34 "Issued Patents"........................................................... 3
1.35 "Key Employees"............................................................ 3
1.36 "Knowledge"................................................................ 3
1.37 "Laws or Decrees".......................................................... 3
1.38 "Liability"................................................................ 4
1.39 "Libra Business"........................................................... 4
1.40 "Libra Networks"........................................................... 4
1.41 "Losses"................................................................... 4
1.42 "Material Adverse Change".................................................. 4
TABLE OF CONTENTS
(continued)
Page
----
1.43 "Material Adverse Effect".................................................. 4
1.44 "Miscellaneous Assets"..................................................... 4
1.45 "Patents".................................................................. 4
1.46 "Patent Applications"...................................................... 4
1.47 "Permits".................................................................. 4
1.48 "Permitted Encumbrances"................................................... 4
1.49 "Person"................................................................... 5
1.50 "Prospective New Purchaser Employees"...................................... 5
1.51 "Proceeding"............................................................... 5
1.52 "Proxy Statement".......................................................... 5
1.53 "Purchase Price"........................................................... 5
1.54 "Purchaser"................................................................ 5
1.55 "Purchaser Compliance Certificate"......................................... 5
1.56 "Purchaser Indemnifiable Losses"........................................... 5
1.57 "Purchaser Indemnitees".................................................... 5
1.58 "Quality Standards"........................................................ 5
1.59 "Related Party"............................................................ 5
1.60 "Required Seller Shareholder Vote"......................................... 5
1.61 "Restricted Period"........................................................ 5
1.62 "SEC"...................................................................... 5
1.63 "Securities Act"........................................................... 5
1.64 "Seller"................................................................... 5
1.65 "Seller Board Recommendation".............................................. 5
1.66 "Seller Compliance Certificate"............................................ 5
1.67 "Seller Financial Statements".............................................. 5
1.68 "Seller Indemnifiable Losses".............................................. 5
1.69 "Seller Indemnitees"....................................................... 6
1.70 "Seller SEC Documents"..................................................... 6
1.71 "Seller Representative".................................................... 6
1.72 "Seller Shareholders' Meeting"............................................. 6
1.73 "Seller Triggering Event".................................................. 6
1.74 "Substitute Prospective New Purchaser Employee"............................ 6
1.75 "Superior Proposal"........................................................ 6
1.76 "Tangible Assets".......................................................... 6
1.77 "Tax"...................................................................... 6
1.78 "Tax Return"............................................................... 6
1.79 "Third Party Claim"........................................................ 6
1.80 "Third Party Proprietary Assets"........................................... 6
1.81 "Trademarks"............................................................... 6
1.82 "Trade Secrets"............................................................ 6
1.83 "Transaction".............................................................. 6
1.84 "Transferred Intellectual Property"........................................ 7
1.85 "Transferred Inventory".................................................... 7
1.86 "Transition Services Agreement"............................................ 7
ARTICLE II: PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES..................... 7
2.1 Purchase and Sale of Assets; Assumption of Assumed Liabilities............. 7
ii
TABLE OF CONTENTS
(continued)
Page
----
2.2 Assets..................................................................... 7
2.3 Excluded Assets............................................................ 8
2.4 Assumption of Liabilities.................................................. 8
2.5 Liabilities Not Assumed.................................................... 8
2.6 Purchase Price............................................................. 8
2.7 Allocation................................................................. 9
2.8 Assignment of Seller's Contracts........................................... 9
ARTICLE III: THE CLOSING................................................................ 9
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLER................................... 9
4.1 Organization............................................................... 10
4.2 Authorization.............................................................. 10
4.3 No Conflicts; Consents..................................................... 10
4.4 Title to Assets; Sufficiency and Condition of Assets....................... 10
4.5 Compliance with Laws....................................................... 11
4.6 SEC Reports; Seller Financial Statements................................... 11
4.7 Absence of Certain Changes or Events....................................... 11
4.8 Intellectual Property...................................................... 12
4.9 Contracts and Arrangements................................................. 14
4.10 Brokers.................................................................... 15
4.11 Litigation................................................................. 15
4.12 Insurance.................................................................. 15
4.13 Taxes...................................................................... 15
4.14 Employee Matters........................................................... 16
4.15 Compliance with the Foreign Corrupt Practices Act.......................... 16
4.16 Ability to Pay Debts....................................................... 17
4.17 Related Party Transactions................................................. 17
4.18 Accuracy of Material Facts; Copies of Materials............................ 17
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF PURCHASER................................ 18
5.1 Organization and Good Standing............................................. 18
5.2 Power, Authorization and Validity.......................................... 18
5.3 No Conflict; Consents...................................................... 18
5.4 Litigation................................................................. 18
5.5 Brokers.................................................................... 18
5.6 Purchase Price............................................................. 18
5.7 Accuracy of Material Facts................................................. 19
ARTICLE VI: PRE-CLOSING COVENANTS OF SELLER............................................ 19
6.1 Conduct of Business........................................................ 19
6.2 Access to Information...................................................... 20
6.3 Obtaining Necessary Consents and Addition of Purchaser as Party to Certain
Contracts.................................................................. 20
6.4 Satisfaction of Conditions Precedent....................................... 20
6.5 No Solicitation............................................................ 20
6.6 Proxy Statement............................................................ 21
iii
TABLE OF CONTENTS
(continued)
Page
----
6.7 Shareholders' Meeting...................................................... 22
6.8 Advise of Changes.......................................................... 22
6.9 Transferred Inventory...................................................... 22
ARTICLE VII: PRE-CLOSING COVENANTS OF PURCHASER......................................... 22
7.1 Advise of Changes.......................................................... 22
7.2 Satisfaction of Conditions Precedent....................................... 23
ARTICLE VIII: MUTUAL COVENANTS........................................................... 23
8.1 Confidentiality and Publicity.............................................. 23
8.2 Regulatory Filings; Consents; Reasonable Efforts........................... 23
8.3 Employment Matters......................................................... 23
8.4 Further Assurances......................................................... 24
8.5 Non-Competition and Non-Solicitation....................................... 24
8.6 Taxes...................................................................... 24
8.7 Transition Services Agreement.............................................. 25
ARTICLE IX: CONDITIONS TO CLOSING...................................................... 25
9.1 Conditions to Each Party's Obligations..................................... 25
9.2 Conditions to Obligations of Seller........................................ 25
9.3 Conditions to Obligations of Purchaser..................................... 26
ARTICLE X: POST-CLOSING MATTERS....................................................... 27
10.1 Further Assurances of Seller............................................... 27
10.2 Further Assurances of Purchaser............................................ 28
10.3 License Grant.............................................................. 28
10.4 Certain Documentation and Information...................................... 28
ARTICLE XI: INDEMNIFICATION............................................................ 28
11.1 Survival of Representations and Warranties................................. 28
11.2 Indemnification by Seller.................................................. 29
11.3 Indemnification by Purchaser............................................... 29
11.4 Third-Party Claims......................................................... 30
11.5 Limitations................................................................ 30
11.6 Distribution of Holdback Amount............................................ 31
ARTICLE XII: TERMINATION OF AGREEMENT................................................... 31
12.1 Termination................................................................ 31
12.2 Effect of Termination...................................................... 32
12.3 Expenses; Termination Fees................................................. 32
ARTICLE XIII: GENERAL.................................................................... 32
13.1 Governing Law and Jurisdiction............................................. 33
13.2 Amicable Resolution........................................................ 33
13.3 Assignment; Binding upon Successors and Assigns............................ 33
13.4 Severability............................................................... 33
iv
TABLE OF CONTENTS
(continued)
Page
----
13.5 Entire Agreement........................................................... 33
13.6 Counterparts............................................................... 34
13.7 Other Remedies............................................................. 34
13.8 Amendment and Waivers...................................................... 34
13.9 Notices.................................................................... 34
13.10 Construction and Interpretation of Agreement............................... 34
13.11 No Joint Venture........................................................... 35
13.12 Absence of Third Party Beneficiary Rights.................................. 35
v